Question

Standard inc. has an annual interest expense of $40,000. if standard's times-interest-earned ratio is 3.0, what is standard's earnings before taxes (ebt)? select one:
a. $160,000
b. $80,000
c. $47,000
d. $120,000

Answer 1

Hello!

Time interest earned ratio=income before tax and interest expenses÷interest expenses

3=X÷40000
Solve for x
X=3×40000
X=120000 This is income before tax and interest expenses but we need to figure out earning before tax only as required so
Earning before tax=120,000−40,000
=80,000. Answer

Good luck!