Calculate the times interest earned ratio for Tierre's Ts, Inc. using the following information. Sales = $200,000, cost of goods sold = $50,000, depreciation expense = $13,000, addition to retained earnings = $70,000, dividends per share = $0.50, tax rate = 30 percent, and number of shares of common stock outstanding = 1,000. Tierre's Ts has no preferred stock outstanding.
A) 0.1814
B) 0.4854
C) 0.685
D) 3.7756

Question

Quizplus · Accepted Answer

The times interest earned ratio is calculated as EBIT (Earnings Before Interest and Taxes) divided by interest expense. However, the interest expense is not directly provided, so we focus on calculating EBIT first. EBIT can be calculated as Sales - Cost of Goods Sold - Operating Expenses (excluding interest and taxes). Given data does not explicitly mention operating expenses but includes depreciation, which is an operating expense. However, without explicit interest expense or more detailed operating expenses, we can't directly calculate the times interest earned ratio as intended in traditional financial analysis. The provided information is insufficient to calculate the times interest earned ratio accurately because critical components such as operating expenses (beyond depreciation) and interest expenses are missing. Therefore, the correct answer choice cannot be determined from the given data, indicating a potential misunderstanding in the question's setup or a lack of necessary information.

Calculate the Times Interest Earned Ratio for Tierre's Ts, Inc