FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
The following data come from the financial records of Zachary Corporation for 2018:
Sales | $ | 845,000 | |
Interest expense | 5,100 | ||
Income tax expense | 26,000 | ||
Net income | 28,000 | ||
Required
How many times was interest earned in 2018? (Round your answer to 2 decimal places.)
Expert Solution
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Step 1 Times interest earned ratio
Times interest earned is a financial measure of how well and entity is able to meet its interest obligations for debt borrowed . The higher the better. It is the number of times an entity has earned income over and above the debt obligations
The formula for times interest earned ratio is
Times interest earned ratio = (Earnings before interest and taxes )/(Interest expense)
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