Question

Use the following information from separate companies a through f: Net Income (Loss) Interest Expense Income Taxes a. $ 142,000 $ 59,640 $ 35,500 b. 136,600 40,980 49,176 c. 145,100 10,157 69,648 d. 120,700 43,452 50,694 e. 92,300 15,691 35,074 f. (39,760 ) 83,894 0 Compute times interest earned.

Answer 1

Times interest earned for company A = (Net Income + Interest Expense + Income Taxes)/ Interest Expense

= (142,000 + 59,640 + 35,500)/59,640

= 237,140/59,640

= 3.98

Times interest earned for company B = (Net Income + Interest Expense + Income Taxes)/ Interest Expense

= (136,600 + 40,980 + 49,176)/40,980

= 226,756/40,980

= 5.53

Times interest earned for company C = (Net Income + Interest Expense + Income Taxes)/ Interest Expense

= (145,100 + 10,157 + 69,648)/10,157

= 224,905/10,157

= 22.14

Times interest earned for company D = (Net Income + Interest Expense + Income Taxes)/ Interest Expense

= (120,700 + 43,452 + 50,694)/43,452

= 214,846/43,452

= 4.94

Times interest earned for company E = (Net Income + Interest Expense + Income Taxes)/ Interest Expense

= (92,300 + 15,691 + 35,074)/15,691

= 143,065/15,691

= 9.12

Times interest earned for company F = (Net Income + Interest Expense + Income Taxes)/ Interest Expense

= (- 39,760 + 83,894 + 0)/83,894

= 44,134/83,894

= 0.53

Note: All the ratios have been rounded to two decimal places.

Exact answer may slightly differ due to rounding off.

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