Question

Use the following information from separate companies a through Net Income (LOSS) $196, eee 109,689 109, 10e 90, 180 68,900 (29,680) Interest Expense $57,240 16, e96 5,455 35,139 10,335 58,470 Income Taxes $26,58 36,216 52,368 37.842 26,182 1. Compute times interest earned. 2. Which company indicates the strongest ability to pay interest expense as it comes due? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute times interest earned. Times Interest Eamed Ratio Choose Numerator: Choose Denominator: Company = Ratio Required Required 2 >

Answer 1

Solution

Times Interest Earned Ratio
Company	Choose Numerator:	/	Choose Denominator:	=	Times Interest Earned Ratio
	Income before interest and taxes*	/	Interest expense	=	Times Interest Earned Ratio
a	$ 189,740	/	$ 57,240	=	3.3	times
b	$ 152,912	/	$ 16,096	=	9.5	times
c	$ 166,923	/	$ 5,455	=	30.6	times
d	$ 163,081	/	$ 35,139	=	4.6	times
e	$ 105,417	/	$ 10,335	=	10.2	times
f	$ 28,790	/	$ 58,470	=	0.5	times

*Net income + Interest expense+ Income tax expense

Alternate answer with answer in 2 decimal place

Times Interest Earned Ratio
Company	Choose Numerator:	/	Choose Denominator:	=	Times Interest Earned Ratio
	Income before interest and taxes	/	Interest expense	=	Times Interest Earned Ratio
a	$ 189,740	/	$ 57,240	=	3.31	times
b	$ 152,912	/	$ 16,096	=	9.50	times
c	$ 166,923	/	$ 5,455	=	30.60	times
d	$ 163,081	/	$ 35,139	=	4.64	times
e	$ 105,417	/	$ 10,335	=	10.20	times
f	$ 28,790	/	$ 58,470	=	0.49	times

Requirement 2

Company C shows highest ability to pay interest.