The information related to interest expense of Classic Music,Inc.is given below: Based on the above data,which of the following is the times-interest-earned ratio? (Round the final answer to two decimal places. )
A)4.08 times
B)4 times
C)6.62 times
D)5 times

Question

The information related to interest expense of Classic Music,Inc.is given below:  Based on the above data,which of the following is the times-interest-earned ratio? (Round the final answer to two decimal places. )
A)4.08 times 
B)4 times 
C)6.62 times 
D)5 times

Quizplus · Accepted Answer

Times-interest-earned ratio = EBIT / Interest Expense
EBIT = Net Income + Income Tax Expense + Interest Expense
EBIT = $264,000 + $107,000 + $66,000
EBIT = $437,000
Interest Coverage Ratio = $437,000 / $66,000 = 6.62 times.

The Information Related to Interest Expense of Classic Music,Inc