Cutsinger Corporation has provided the following data from its most recent income statement: The times interest earned ratio is closest to:
A)1.83
B)0.28
C)1.28
D)0.19

Question

Cutsinger Corporation has provided the following data from its most recent income statement:  The times interest earned ratio is closest to:
A)1.83 
B)0.28 
C)1.28 
D)0.19

Quizplus · Accepted Answer

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

EBIT = Operating Income + Non-operating Income = $180,000 + $25,000 = $205,000

Interest Expense = $160,000

Times Interest Earned Ratio = EBIT / Interest Expense = $205,000 / $160,000 = 1.28

Therefore, the closest option to the times interest earned ratio is C) 1.28.

Cutsinger Corporation Has Provided the Following Data from Its Most