Calculating the Times Interest Earned RatioIn the current year, Pringle Company reported Sales of $1,420,000, Interest Expense of 512,000, IncomeTax Expense of$13,000. and Net Income of 551000. What is Pringle’s times interest earned ratio?
Times interest earned ratio = Net operating income/Interest expense
= $551,000/$512,000
= 1.08 times
Explanation:
Times interest earned is the ratio of net operating income to interest income. Net operating income = $551,000 and interest expense = $512,000. The division of net operating income by interest expense gives times interest earned ratio.
