Question

A company had interest expense of $7,800, income before interest expense and income taxes of $19,200, and net income of $9,600. The company's times interest earned ratio equals:

Answer 1

Answer:

2.5 times

Explanation:

The company's times interest ratio is computed as;

= Income before interest expense and income taxes / Interest expenses

Given that;

Income before interest expense and income taxes = $19,200

Interest expenses = $7,800

Then,

Company's interest times ratio = $19,200 / $7,800

Company's interest times ratio = 2.5 times