Namekagon Corporation's interest coverage ratio for 2011 is:
A) 1.45.
B) 1.69.
C) 2.45.
D) 4.92.

Question

Quizplus · Accepted Answer

The interest coverage ratio is calculated by dividing earnings before interest and taxes (EBIT) by the interest expense. 
Interest coverage ratio = EBIT / Interest expense 
From the financial statements, we can find: 
EBIT = $12,000 
Interest expense = $7,100 
Therefore, the interest coverage ratio = $12,000 / $7,100 = 1.69. 
Hence, the correct answer is B.

Namekagon Corporation's Interest Coverage Ratio for 2011 Is