Question

A company had fixed interest expense of $8,100, its income before interest expense and income taxes is $19,400, and its net income is $9,800. The company's times interest earned ratio equals:

Answer 1

Answer:

2.395

Explanation:

times interest expense = earnings before interest and taxes (EBIT) / interest expense

times interest expense = $19,400 / $8,100 = 2.395

The times interest expense ratio measures how well a company can pay for its current interest obligations. The higher the TIE ratio, the easier it is for a company to cover its interest payments.