Question

The following information is taken from the financial statements of Burton Industries:________.
Total Assets $360,000
Total Liabilities 162,000
Total Stockholders' Equity 198,000
Net Income 126,000
Income Tax Expense 37,800
Interest Expense 9,000
a. 18.2
b. 15.0
c. 4.7
d. 19.2.

Answer 1

Answer:

d. 19.2

Explanation:

The missing question is "The company's times interest earned ratio is?"

Solution

Interest Earned Ratio = Income before Interest and taxes or EBIT / Interest Expenses

Net Income                       $126,000

Add: Income taxes            $37,800

Add: Interest Expenses    $9,000

EBIT                                   $172,800

Hence, Interest Earned Ratio = EBIT / Interest Expenses

Interest Earned Ratio = $172,800 / $9,000

Interest Earned Ratio = 19.2