Times interest earned is calculated by:
A)Multiplying interest expense times income.
B)Dividing interest expense by income before interest expense.
C)Dividing income before interest expense and any income tax by interest expense.
D)Dividing interest and income tax expense by income before interest and income tax expense.
E)Dividing income before interest expense by interest expense and income taxes.

Question

Quizplus · Accepted Answer

Times interest earned is a measure of a company's ability to cover its interest expense with its earnings before interest and taxes (EBIT). It is calculated by dividing income before interest expense and any income tax by interest expense. Option C is the correct choice as it correctly defines and calculates times interest earned.

Times Interest Earned Is Calculated By