Balance sheet and income statement data indicate the following: Based on the data presented above, what is the times interest earned ratio (round to two decimal places)?
A) 5.00
B) 5.44
C) 4.00
D) 4.33

Question

Balance sheet and income statement data indicate the following:​  Based on the data presented above, what is the times interest earned ratio (round to two decimal places)?
A) 5.00 
B) 5.44 
C) 4.00 
D) 4.33

Quizplus · Accepted Answer

To calculate the times interest earned ratio, we need to use the formula:

Times Interest Earned Ratio = Net Income before Interest and Taxes / Interest Expense

From the given income statement, we can see that the Net Income before Interest and Taxes is $78,000, and from the balance sheet, we can see that the Interest Expense is $14,300.

Plugging in the numbers into the formula, we get:

Times Interest Earned Ratio = $78,000 / $14,300 = 5.44 (rounded to two decimal places)

Therefore, the best answer is B, with an explanation showing the calculation of the formula.

Balance Sheet and Income Statement Data Indicate the Following:​

Balance Sheet and Income Statement Data Indicate the Following: