Ajax Corp's sales last year were $510,000,its operating costs were $362,500,and its interest charges were $12,500.What was the firm's times-interest-earned (TIE)ratio?
A) 11.80
B) 8.85
C) 13.10
D) 12.15
E) 14.75

Question

Quizplus · Accepted Answer

The Times Interest Earned (TIE) ratio is calculated by dividing the earnings before interest and taxes (EBIT) by the interest charges. EBIT is calculated as sales minus operating costs. So, EBIT = $510,000 - $362,500 = $147,500. The TIE ratio is then $147,500 / $12,500 = 11.80.

Ajax Corp's Sales Last Year Were $510,000,its Operating Costs Were