Balance sheet and income statement data indicate the following:
Based on the data presented,what is the times interest earned ratio? (Round to one decimal point.)
A) 1.5
B) 6.4
C) 6.5
D) 5.5

Question

Balance sheet and income statement data indicate the following: ​
 Based on the data presented,what is the times interest earned ratio? (Round to one decimal point.)
A) 1.5 
B) 6.4 
C) 6.5 
D) 5.5

Quizplus · Accepted Answer

The formula for times interest earned ratio is earnings before interest and taxes (EBIT) divided by interest expense. From the income statement data, we can calculate EBIT as $6,000 + $1,500 + $2,000 = $9,500. From the balance sheet data, interest expense is given as $1,500. Therefore, the times interest earned ratio is $9,500 / $1,500 = 6.33, which rounds to 6.5 when rounded to one decimal point. Therefore, the best choice is C.

Balance Sheet and Income Statement Data Indicate the Following: ​

Balance Sheet and Income Statement Data Indicate the Following: