Stargate Limited reported the following on its income statement: Profit before income taxes $\quad \$ 560,000$
$~~~~~~~~$Income taxexpense $~~~~~~~\underline{140,000}$
$~~~~~~~~$Profit $~~~~~~~~~~~~~~~~~~~~~~~~~\underline { \$ 420,000 }$ An analysis of the income statement revealed that interest expense was $ 40,000. Stargate's interest coverage ratio was

Question

Quizplus · Accepted Answer

The interest coverage ratio is calculated as (Profit before income taxes + Interest expense) / Interest expense. Here, it is ($560,000 + $40,000) / $40,000 = 15 times.

Stargate Limited Reported the Following on Its Income Statement: Profit $560,000\quad \$ 560,000$560,000

Stargate Limited Reported the Following on Its Income Statement: Profit $\quad \$ 560,000$