Fayer Corporation has provided the following financial data:

Dividends on common stock during Year 2 totaled $4,500. The market price of common stock at the end of Year 2 was $10.88 per share.

-The company's times interest earned for Year 2 is closest to:
A)7.71
B)2.61
C)5.01
D)4.01

Question

Fayer Corporation has provided the following financial data:

Dividends on common stock during Year 2 totaled $4,500. The market price of common stock at the end of Year 2 was $10.88 per share.

-The company's times interest earned for Year 2 is closest to:
A)7.71 
B)2.61 
C)5.01 
D)4.01

Quizplus · Accepted Answer

Times Interest Earned = (Earnings Before Interest and Taxes)/Interest Expense
For Year 2, Times Interest Earned = (25,000+12,000)/12,000 = 5.01 
Therefore, the closest answer option is C.

Fayer Corporation Has Provided the Following Financial Data