Ajax Corp's sales last year were $510,000,its operating costs were $362,500,and its interest charges were $12,500.What was the firm's times-interest-earned (TIE)ratio?
A) 11.80
B) 9.32
C) 10.50
D) 14.75
E) 9.56

Question

Quizplus · Accepted Answer

The TIE ratio is calculated as EBIT (Earnings Before Interest and Taxes) divided by interest charges. EBIT is sales minus operating costs, which is $510,000 - $362,500 = $147,500. The TIE ratio is $147,500 / $12,500 = 11.80.

Ajax Corp's Sales Last Year Were $510,000,its Operating Costs Were