A company's income before interest expense and taxes is $250,000 and its interest expense is $100,000. Its times interest earned ratio is 2.5.
Times Interest Earned Ratio = Income before Interest Expense and Income Taxes/Interest Expense
Times Interest Earned Ratio = $250,000/$100,000 = 2.5

Question

Quizplus · Accepted Answer

The calculation provided for the times interest earned ratio is correct and results in a ratio of 2.5, which meets the requirement for a healthy financial situation.

A Company's Income Before Interest Expense and Taxes Is $250,000