A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000.Its times interest earned ratio is equal to .4.

Question

Quizplus · Accepted Answer

The times interest earned (TIE) ratio is calculated as income before interest expense and taxes divided by interest expense. In this case, TIE would be 2.5 ($250,000/$100,000), not 0.4. Therefore, the statement is false.

A Company's Income Before Interest Expense and Taxes Is $250,000