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A company's net income after tax was $400,000 for its most recent year. The company's income statement included?

Income Tax Expense of $140,000 and Interest Expense of $60,000. At the beginning of the year the company's stockholders' equity was $1,900,000 and at the end of the year it was $2,100,000.

What is the times interest earned for the company?

a)6.7

b)9.0

c)10

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Question ajoutée par Mohammed Asim Nehal , M Asim Nehal & Co , Chartered Accountants
Date de publication: 2015/08/04
Ahmer Zamir
par Ahmer Zamir , Consultant , Saleem Associates & Co

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

mohammed ashour
par mohammed ashour , Main Accountant , Ghassan Ashour Foundation

What is the times interest earned for the companyis a6.7

SIRAJUDHEEN KOTTAMBARA
par SIRAJUDHEEN KOTTAMBARA , Financial Internal Auditor , Sharjah Electricity, Water and Gas Authority

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

 

Option (c) 10 .

Rafiq Zaman
par Rafiq Zaman , Senior Manager / Director , Rynshab Project Management Services

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

 

Faizan Iftikhar
par Faizan Iftikhar , Deputy Manager Accounts & Finance , Zahidjee Textile Mills Limited

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

 

Rashid Mehmood
par Rashid Mehmood , Head Of Accounts , Mansha Brothers

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

Lameck Phiri
par Lameck Phiri , Property Officer , Acre Investments

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

 

 .

MEKHTICHE BRAHIM
par MEKHTICHE BRAHIM , charge des moyes / gestionnaire des stoks , Agence de Développements Social

the correct option is c.10

Zubair Ali Akram
par Zubair Ali Akram , Operations Manager , Habib Metro Bank

10 is the times interest earned for the company

wasswa jonathan
par wasswa jonathan , Security Supervisor , Emrill 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

Muhammad  Awais
par Muhammad Awais , Web Developer , Fiverr

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:

  1. Start with net income after tax: $400,000

  2. Add back interest expense: $400,000 + $60,000 = $460,000

  3. 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.

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