Question

The Amos Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.

	End of current year	End of prior year
Net sales revenue​ (all credit)	​$1,220,000
Cost of goods sold	​$725,000
Gross profit	​$495,000
​Selling/general expenses	​$280,000
Interest expense	$48,000
Net Income	$167,000
Current assets	​$113,000	​$82,000
Longminus−term assets	​$512,000	​$440,000
Total assets	​$625,000	​$522,000
Current liabilities	​$57,000	​$52,000
Longminus−term liabilities	​$275,000	​$245,000
Common​ stockholders' equity	​$293,000	​$225,000
Total liabilities and​ stockholders' equity	​$625,000	​$522,000

Inventory and prepaid expenses account for​ $30,000 of the current​ year's current assets.

Average inventory for the current year is​ $36,250.

Average net accounts receivable for the current year is​ $45,000.

There are​ 35,000 shares of common stock outstanding.

Total dividends paid during the current year were​ $17,000.

The market price per share of common stock is​ $20.

What is the times−interest−earned ratio for the current​ year?

A.4.48times

B.0.22times

C.1.9times

D.1times

Answer 1

Times interest earned ratio = Income before interest and tax/Interest expense

= (495000-280000)/48000

Times interest earned ratio = 4.48 Times

So answer is a) 4.48 Times