Answer:
Company a. 4.05
Company b. 4.49
Company c. 4.64
Company d. 30.60
From the above, Company d. has the strongest ability to pay interest expense as it comes due with 30 times.
Explanation:
Times interest earned = Income before interest and tax ÷ Interest expenses
Company a. Times interest earned = ($136,000 + $55,760 + $34,000) ÷ $55,760 = 4.05 times
Company b. Times interest earned = ($130,600 + $50,934 + $47,016) ÷ $50,934 = 4.49 times
Company c. Times interest earned = ($115,600 + $45,084 + $48,552) ÷ $45,084 = 4.64 times
Company d. Times interest earned = ($139,100 + $6,955 + $66,768) ÷ $6,955 = 30.60 times
From the above, Company d. has the strongest ability to pay interest expense as it comes due with 30 times.
