Thrasher Company reported income before taxes of $180,000.The company is in a 30% income tax bracket.Also,Thrasher's income statement contained a charge for interest expense amounting to $60,000.Based on this information alone,the company's times interest ratio would be:

Question

Quizplus · Accepted Answer

The times interest earned ratio is calculated as (Income before taxes + Interest expense) / Interest expense. Here, it is ($180,000 + $60,000) / $60,000 = 4.0.

Thrasher Company Reported Income Before Taxes of $180,000