Question

Creighton Company reported the following on the company's income statement for the year. Interest expense $600,000 Income before income tax expense 4,200,000 What is the times interest earned ratio? a.7.0 b.8.0 c.6.0 d.None of these choices are correct.

Answer 1

Answer:

The correct answer is A.

Explanation:

Giving the following information:

Interest expense= $600,000

Income before income tax expense= 4,200,000

To calculate the interest earned ratio we need to use the following formula:

Times interest earned ratio= earnings before interest and tax/ interest rate

Times interest earned ratio= 4,200,000/600,000= 7