TLR Productions reported Interest expense of $9,000, Income tax expense of $27,000 and Net income of $110,000. TLR's interest coverage ratio is: (Round your final answer to two decimal places.)

Question

Quizplus · Accepted Answer

To calculate the interest coverage ratio, we need to divide TLR's earnings before interest and taxes (EBIT) by its interest expense.

EBIT = Net income + Interest expense + Income tax expense 
EBIT = $110,000 + $9,000 + $27,000 
EBIT = $146,000

Interest Coverage Ratio = EBIT / Interest expense 
Interest Coverage Ratio = $146,000 / $9,000 
Interest Coverage Ratio = 16.222

Therefore, the answer is choice B (16.222).

TLR Productions Reported Interest Expense of $9,000, Income Tax Expense