Question

Orono Corp.'s sales last year were $435,000, its operating costs were $362,500, and its interest charges were $12,500. What was the firm's times interest earned (TIE) ratio

Answer 1

Answer:

Time Interest Earned Ratio (TIE Ratio) = 5.8 times

Explanation:

Time Interest Earned Ratio (TIE Ratio) = Income Before Interest and Tax/ Interest Expense

Details                                                    Amount ($)

Sales                                                      435,000

Less: Operating Cost                            362,500

Income Before Interest and Tax (x)     72,500

Interest (y)                                              12,500

TIE Ratio (x/y)                                         5.8 times