If a company's income before interest expense and income taxes is $575,000, and its interest expense is $145,000. its times interest ration will be 3.96.
Explanation of the above answer.
A company's Time Interest Earned ratio shows us its ability to pay its debts, or we can say how easily they can clear their debt.
Time interest earned ratio is an indication of a firm's ability to meet both long-term and short-term obligations.
Here, the income before expenses is given as: $575000
And, the interest expenses = $145000
The question wants us to find time interest earned ratio.
We get this by:
Company's initial income/interest expenses
= $575,000/$145,000
= 3.96
Thus, 3.96 is the time interest earned ratio for this particular question.
To learn more about time interest earned ratio:
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