The financial statements of Burnaby Mountain Trading Company are given below. Note: The common shares are trading in the stock market for $27 each.
-Refer to the financial statements of Burnaby Mountain Trading Company.The firm's times interest earned ratio for 2008 is _________.
A) 2.80
B) 6.00
C) 9.00
D) 11.11

Question

The financial statements of Burnaby Mountain Trading Company are given below.  Note: The common shares are trading in the stock market for $27 each.
-Refer to the financial statements of Burnaby Mountain Trading Company.The firm's times interest earned ratio for 2008 is _________.
A) 2.80 
B) 6.00 
C) 9.00 
D) 11.11

Quizplus · Accepted Answer

The times interest earned ratio can be calculated by dividing the earnings before interest and taxes (EBIT) by the interest expense. From the income statement, we can see that the EBIT for 2008 is $360,000 and the interest expense is $60,000. Therefore, the times interest earned ratio for 2008 is 6 ($360,000/$60,000).

The Financial Statements of Burnaby Mountain Trading Company Are Given