Below is selected information from Marker's 2012 financial statements: Marker's 2012 Interest Coverage ratio is
A) 7.66
B) 1.00
C) 11.35
D) 4.35

Question

Below is selected information from Marker's 2012 financial statements:  Marker's 2012 Interest Coverage ratio is
A) 7.66 
B) 1.00 
C) 11.35 
D) 4.35

Quizplus · Accepted Answer

Interest Coverage ratio is calculated by dividing earnings before interest and taxes (EBIT) by the interest expense. From the statement given, Marker's EBIT is $35,757,000 and its interest expense is $3,150,000. Therefore, the interest coverage ratio is calculated as follows:

Interest Coverage ratio = EBIT / Interest expense
Interest Coverage ratio = $35,757,000 / $3,150,000
Interest Coverage ratio = 11.35

Hence, the correct option is C.

Below Is Selected Information from Marker's 2012 Financial Statements