Question

​Frank's Boat​ Shop, Inc. reports operating income of​ $80,000 and interest expense of ​ $15,000. The average number of shares of common stock outstanding during the year was​ 30,000 shares. What is the times-interest-earned ratio?a. 3.5b. 6.0c. 8.9d. 5.0

Answer 1

Answer: Option (d) is correct.

Explanation:

Given that,

Operating income =​ $80,000

Interest expense = $15,000

Average number of shares of outstanding stock during the year = 30,000 shares

Times interest earned ratio = $\frac{Net\ Income\ before\ tax}{Interest\ Expense}$

=$\frac{80000}{15000}$

= 5.33

So, the nearest value in the options is 5.0.

Therefore, option (d) is correct.