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What is the times interest earned for the company?
a)6.7
b)9.0
c)10
The correct option is C)10
Earning before Interest & Taxes =400,000+160,000+40,000
=600,000
Times Interest earned = 60,000/600,000=10 times
What is the times interest earned for the companyis a6.7
Net Income after Tax = $ 400,000
Add: Income Tax expense = $ 140,000
Add: Interest Expense = $ 60,000
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Net income before interest and tax = $ 600,0000
Time interest earned for company = $ 600,000/ $ 60,000 = 10 times
Option (c) 10 .
Times Interes earned ratio = Earning before Interest & taxes / Interest Expense
= (Net Income + Tax Expense + Interes Expense) / Interest Expense
= ($400,000 + $140,000 + $60,000) / $60,000
= $600,000 / $60,000 =10
The time of interest earned for the company is 10
Interes cover ratio = Earning before Interest & taxes / Interest Expense
= (Net Income + Tax Expense + Interes Expense) / Interest Expense
= ($400,000 + $140,000 + $60,000) / $60,000
= $600,000 / $60,000 =10 times
Net Income after Tax = $ 400k
Add: Income Tax = $ 140k
Add: Interest = $ 60k
Net income before interest and tax = $ 600k
Time interest earned for company = $ 60k/ $ 600k = 10 times
The correct answer is option C) 10 Times
Answer (c) 10
Net Income after Tax = $ 400,000
Add: Income Tax expense = $ 140,000
Add: Interest Expense = $ 60,000
Net income before interest and tax = $ 600,0000
Time interest = $ 600,000/ $ 60,000 = 10 times
.
the correct option is c.10
10 is the times interest earned for the company
Net Income after Tax = $ 400,000
Add: Income Tax expense = $ 140,000
Add: Interest Expense = $ 60,000
Net income before interest and tax = $ 600,0000
Time interest earned for company = $ 600,000/ $ 60,000 = 10 times
The times interest earned (TIE) ratio measures a company's ability to pay its interest expenses on its debt obligations. It is calculated by dividing the earnings before interest and taxes (EBIT) by the interest expense.
To calculate the TIE ratio for the company, we need to determine the EBIT:
Start with net income after tax: $400,000
Add back interest expense: $400,000 + $60,000 = $460,000
Add back income tax expense: $460,000 + $140,000 = $600,000
EBIT = $600,000
Now that we have determined the EBIT, we can calculate the TIE ratio:
TIE ratio = EBIT / Interest Expense = $600,000 / $60,000 = 10
So, the times interest earned for the company is 10, which means that the company is earning 10 times the amount of its interest expense. This indicates that the company is in a relatively strong financial position and is capable of paying its interest expenses on its debt obligations. A high TIE ratio is generally considered a positive sign for investors and creditors, as it suggests that the company is generating enough income to meet its debt obligations and that it has a lower risk of default.
