Aps Company reported the following on its income statement: An analysis of the income statement revealed that interest expense was $60,000.Aps Company's times interest earned was

Question

Aps Company reported the following on its income statement:  An analysis of the income statement revealed that interest expense was $60,000.Aps Company's times interest earned was

Quizplus · Accepted Answer

The times interest earned ratio is calculated by dividing earnings before interest and tax (EBIT) by interest expense. The formula is:

Times Interest Earned = EBIT / Interest Expense

Using the information given in the question:

EBIT = $540,000 ($480,000 + $60,000)
Interest Expense = $60,000

Therefore, Times Interest Earned = $540,000 / $60,000 = 8 times.

Option C is the correct answer.

Aps Company Reported the Following on Its Income Statement