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The information related to interest expense of classic music, inc. is given below:
Net Income $265,000
Income tax expense 105,000
Interest expense 66,000
Based on the above data, which of the following is the times- interest- earned ratio? (round the final answer to two decimal places)
A) 6.61 times
B) 4.15 times
C) 5.02 times
D) 4.02 times

Respuesta :

Answer:

The times- interest- earned ratio is 6.61 times. The right answer is A.

Explanation:

In order to calculate the times- interest- earned ratio we would have to make the following calculation:

times- interest- earned ratio=Income before interest and taxes/Interest expense

According to given data

Income before interest and taxes=Net Income+Income tax expense +Interest expense

Income before interest and taxes=$265,000+$105,000+$66,000

Income before interest and taxes=$436,000

Therefore, times- interest- earned ratio=$436,000/$66,000

times- interest- earned ratio= 6.61 times

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