Peartree Company provides the following income statement for the year 2014: How much is the times-interest-earned ratio?

Question

Peartree Company provides the following income statement for the year 2014:  How much is the times-interest-earned ratio?

Quizplus · Accepted Answer

The times-interest-earned ratio is calculated by dividing earnings before interest and taxes (EBIT) by interest expense.

From the income statement provided, we can see that EBIT is $25,000 and interest expense is $500.

Times-interest-earned ratio = EBIT/Interest expense = $25,000/$500 = 50.

Therefore, the answer is C) 50.

Peartree Company Provides the Following Income Statement for the Year