Question

Crane Company reported the following on its income statement: Income before income taxes $504000 Income tax expense 153000 Net income $351000 An analysis of the income statement revealed that interest expense was $80000. Crane Company's times interest earned was

Answer 1

Answer:

Crane Company's times interest earned was 6.30 times.

Explanation:

The Times Interest Earned ratio (TIE) shows how well a company covers its interest obligation.

Times Interest Earned ratio (TIE)  = Earnings Before Interest and Tax (EBIT) ÷ Interest

                                                       = $504,000 ÷ $80,000

                                                       = 6.30 times