A company has fixed interest expense of $5,000,its income before interest expense and income taxes is $17,000,and its net income is $9,400.The company's times interest earned ratio equals:
A)0.5.
B)1.8.
C)1.9.
D)3.4.
E)0.3.

Question

Quizplus · Accepted Answer

The times interest earned ratio is calculated as follows:

Times Interest Earned Ratio = Income Before Interest and Taxes / Interest Expense

Plugging in the numbers given in the problem:

Times Interest Earned Ratio = 17,000 / 5,000 
Times Interest Earned Ratio = 3.4

Therefore, the answer is D) 3.4.

A Company Has Fixed Interest Expense of $5,000,its Income Before