The Fortune Company reported the following income for Year 2:

What is the company's number of times interest is earned ratio?
A)7 times
B)6 times
C)4 times
D)None of these answers is correct.

Question

The Fortune Company reported the following income for Year 2:

What is the company's number of times interest is earned ratio?
A)7 times 
B)6 times 
C)4 times 
D)None of these answers is correct.

Quizplus · Accepted Answer

Times interest earned = (Net income + Taxes + Interest expense)÷ Interest expense
Times interest earned = ($20,000 + $10,000 + $5,000)÷ $5,000 = $35,000 ÷ $5,000 = 7 times

The Fortune Company Reported the Following Income for Year 2