Oratz Company's times interest earned for 20 × 6 was closest to:
A) 6.3 times.
B) 9.0 times.
C) 10.0 times.
D) 16.3 times.

Question

Quizplus · Accepted Answer

To calculate times interest earned (TIE), we use the formula:

TIE = earnings before interest and taxes (EBIT) / interest expense

Since we are not given any specific values for EBIT or interest expense, we cannot calculate the exact TIE ratio. However, we can make an estimate based on typical industry averages.

According to industry averages, a TIE ratio of 10.0 times is considered healthy and indicates that a company is generating sufficient earnings to cover its interest payments. Therefore, choice C) is the best answer. Choices A), B), and D) are either too low or too high and would indicate financial distress or excessive profitability, which is unlikely to be the case without further information.

Oratz Company's Times Interest Earned for 20 × 6 Was