Ajax Corp's sales last year were $400,000, its operating costs were $362,500, and its interest charges were $12,500. What was th

Question

xenn [34]

4 years ago

11

Ajax Corp's sales last year were $400,000, its operating costs were $362,500, and its interest charges were $12,500. What was th

e firm's times-interest-earned (TIE) ratio

Business

1 answer:

olga nikolaevna [1] · Answer 1 · 2021-11-15T11:21:31+03:00

Answer:

3 times

Explanation:

Times Interest earned is a financial ratio that shows how many times an entity's net income or earnings before interest and taxes can be used to settle the company's interest expense.

It is given as the ratio of earnings before interest and tax to interest expense.

Earnings before interest and taxes is the difference of sales and operating costs.

= $400,000 - $362,500

= $37,500

Hence, the firm's times-interest-earned (TIE) ratio

= $37,500/$12,500

= 3