The following information is from the financial statements of Hayden Inc.: $\begin{array}{lr}
\text { Net income } & \$ 450,000 \
\text { Income tax expense } & 250,000 \
\text { Interest expense } & 150,000 \
\text { Long-term debt } & 1,875,000
\end{array}$
The times-interest-earned ratio for Hayden would be closest to:
A)3 times
B)4.7 times
C)5.7 times
D)8 times

Question

Quizplus · Accepted Answer

The times-interest-earned ratio is calculated as (Net Income + Income Tax Expense + Interest Expense) / Interest Expense. For Hayden Inc., this is ($450,000 + $250,000 + $150,000) / $150,000 = $850,000 / $150,000 = 5.67, which is closest to 5.7 times.

The Following Information Is from the Financial Statements of Hayden