A company had interest expense of $5,000,income before interest expense and income taxes of $17,000,and net income of $9,400.The company's times interest earned ratio equals:
A)0.5.
B)1.8.
C)1.9.
D)3.4.
E)0.3.

Question

Quizplus · Accepted Answer

Times Interest Earned Ratio = Income before Interest and Taxes (IBIT) / Interest Expense

From the given information,

IBIT = Income Before Interest and Taxes = $17,000
Interest Expense = $5,000

Therefore, Times Interest Earned Ratio =  IBIT / Interest Expense = $17,000 / $5,000 = 3.4

Hence, the answer is D) 3.4.

A Company Had Interest Expense of $5,000,income Before Interest Expense