Question

A company had interest expense of $9,000, income before interest expense and income taxes of $20,000, and net income of $10,400. The company's times interest earned ratio equals:_______

Answer 1

2.22 times

Step-by-step explanation:

Interest earned ratio is computed as;

Interest earned ratio = Earnings before interest and taxes / Total interest payable

Given that;

Earnings before interest and taxes = $20,000

Total interest payable = $9,000

Therefore,

Interest earned ratio = $20,000 / $9,000

Interest earned ratio = 2.22 times