Orange Company's times interest earned for 20 × 6 was closest to:

Question

Quizplus · Accepted Answer

The times interest earned ratio is calculated by dividing earnings before interest and taxes (EBIT) by interest expenses. A higher ratio indicates a better ability to cover interest expenses. Without more information about Orange Company, we cannot calculate the exact ratio, but we can eliminate some of the answer choices based on common sense. A times interest earned ratio of 11.2 or 16.0 would be relatively low and suggest that Orange Company may struggle to pay its interest expenses. A ratio of 28.3 would be extremely high and unlikely for most companies. Therefore, the best choice is C) 17.0 times, which falls in a reasonable range and could indicate a healthy ability to cover interest expenses.

Orange Company's Times Interest Earned for 20 × 6 Was