Hardister Corp. Hardister Corp. has the following information available from its financial statements for 2012:
Refer to the Hardister Corp. information above. Hardister's times-interest-earned ratio is: (round to two decimal places)
A) 8.00.
B) 9.00.
C) 6.00.
D) 5.00.

Question

Hardister Corp. Hardister Corp. has the following information available from its financial statements for 2012:
 Refer to the Hardister Corp. information above. Hardister's times-interest-earned ratio is: (round to two decimal places)
A) 8.00. 
B) 9.00. 
C) 6.00. 
D) 5.00.

Quizplus · Accepted Answer

The times-interest-earned ratio is calculated by dividing Earnings Before Interest and Taxes (EBIT) by Interest Expense. Hardister's EBIT is $450,000 and its Interest Expense is $50,000, so its times-interest-earned ratio is calculated as follows: $450,000 ÷ $50,000 = 9. Therefore, the correct answer is B) 9.00.