The information related to interest expense of Stereo Music,Inc.is given below:

Based on the above data,which of the following is the times-interest-earned ratio?
A)3.92 times
B)3.54 times
C)6.1 times
D)4.54 times

Question

The information related to interest expense of Stereo Music,Inc.is given below:

Based on the above data,which of the following is the times-interest-earned ratio?
A)3.92 times 
B)3.54 times 
C)6.1 times 
D)4.54 times

Quizplus · Accepted Answer

C)Times-interest-earned ratio = EBIT / Interest Expense
EBIT = Net Income + Income Tax Expense + Interest Expense
EBIT = $255,000 + $112,000 + $72,000
EBIT = $439,000
Interest Coverage Ratio = $439,000 / $72,000 = 6.1 times.

The Information Related to Interest Expense of Stereo Music,Inc