Wal-Mart had income before interest expense and income taxes of $12,581 million and interest expense of...
Wal-Mart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million. Sears had income before interest expense and income taxes of $3,596 million and interest expense of $1,143 million. Calculate the times interest earned for each company and comment on the results.
Homework Answers
Answer:- Times interest earned ratio= Income before Interest & Taxes(EBIT)/Interest expenses
Wal-Mart =$12581/$1063 = 11.83 times
Sears =$3596/$1143 = 3.15 times
Explanation:- Wal-Mart time’s interest earned is almost four times that of Sears. Neither company appears to have a very high risk of default on debt, but Wal-Mart appears to have more of a cushion than Sears.
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