Lee Company has provided the following information: • Cash flow from operating activities,$240,000
• Net income,$204,000
• Interest expense,$20,000
• Interest cash payments,$10,000
• Income tax payments,$140,000
• Income tax expense,$136,000
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What was Lee's times interest earned ratio?
A)39.0
B)18.0
C)35.4
D)17.7

Question

Quizplus · Accepted Answer

Times interest earned (TIE) ratio can be calculated using the formula:

TIE = (Net Income + Interest Expense + Income Tax Expense) / Interest Expense

Substituting the given values, we get:

TIE = (204,000 + 20,000 + 136,000) / 20,000 = 18

Therefore, the TIE ratio of Lee Company is 18. Option B is the correct answer.

Lee Company Has Provided the Following Information: • Cash Flow