Coverage ratio: Trident Corp. has debt of $3.35 million with an interest rate of 6.875 percent. The company has an EBIT of $2,766,009. What is its times interest earned?

Question

Quizplus · Accepted Answer

Times interest earned = EBIT/Interest expense
Interest expense = Debt x Interest rate = $3.35 million x 6.875% = $230,938.75
Times interest earned = $2,766,009/$230,938.75 = 11.98 times, which can be rounded up to 12 times. Thus, the best choice is B.

Coverage Ratio: Trident Corp