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16 April, 18:45

A company reports the following: Income before income tax $387,520 Interest expense 69,200 Determine the times interest earned. Round your answer to one decimal place.

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  1. 16 April, 18:47
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    6.6

    Explanation:

    The formula and the computation of the times interest earned is shown below:

    Times earned interest = (Earnings before income tax and interest expense) : (Interest expense)

    where,

    Earnings before income tax and interest expense is

    = $387,520 + $69,200

    = $456720

    And, the interest expense is $69,200

    So, the times interest earned ratio is

    = $456,720 : $69,200

    = 6.6
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