Balance sheet and income statement data indicate the following: Based on the data presented above, what is the number of times bond interest charges were earned (round to one decimal point)?

Question

Balance sheet and income statement data indicate the following:  Based on the data presented above, what is the number of times bond interest charges were earned (round to one decimal point)?

Quizplus · Accepted Answer

To calculate the number of times bond interest charges were earned, we need to use the interest coverage ratio formula.

Interest Coverage Ratio = EBIT / Interest Expense

Here, EBIT = Operating Income + Non-Operating Income = 275 + 30 = 305

Interest Expense = 58

Interest Coverage Ratio = 305 / 58 = 5.259

Therefore, the number of times bond interest charges were earned is 5.259, which rounds to 4.5. Hence, the answer is C.

Balance Sheet and Income Statement Data Indicate the Following