Homework Answers
Answer- Times interest earned ratio= Income before Interest & Taxes(EBIT)/Interest expenses
Company a = ($164000+$67240+$41000)/$67240
= $272240/$67240
= 4.05 times
Company b = ($158600+$45994+$57096)/$45994
= $/$45994
= 5.69 times
Company c = ($139400+$36244+$58548)/$36244
= $234192/$36244
= 6.46 times
Company d = ($167100+$11697+$80208)/$80208
= $259005/$80208
= 3.23 times
Company c indicates the strongest ability to pay interest expense as ir comes due.
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