Western Gear has net income of $12,400, a tax rate of 21 percent, and interest expense of $1,600. What is the times interest earned ratio for the year?
A) 9.63
B) 7.75
C) 10.81
D) 14.97
E) 10.97

Question

Quizplus · Accepted Answer

Times interest earned ratio = (Net Income + Interest Expense + Tax Expense) / Interest Expense

Tax Expense = Net Income * Tax Rate = $12,400 * 0.21 = $2,604

Times interest earned ratio = ($12,400 + $1,600 + $2,604) / $1,600 = 10.81

Western Gear Has Net Income of $12,400, a Tax Rate