Simple Simon's balance sheet and income statement accounts follow:

What is Simple Simon's times interest earned ratio for 2010?

Question

Simple Simon's balance sheet and income statement accounts follow: 
 
What is Simple Simon's times interest earned ratio for 2010?

Quizplus · Accepted Answer

To calculate the times interest earned ratio, we need to divide earnings before interest and taxes (EBIT) by the interest expense.

In this case, we can see from the income statement that Simple Simon's EBIT for 2010 was $157,500. We can also see from the balance sheet that the interest expense for the year was $37,500.

So, the times interest earned ratio for 2010 is:

$157,500 ÷ $37,500 = 4.2

Therefore, the answer is B, or 4.22%.

Simple Simon's Balance Sheet and Income Statement Accounts Follow