Gorilla Movers has sales of $645,560, cost of goods sold of $425,890, depreciation of $32,450, and interest expense of $12,500. The tax rate is 30 percent. What is the times interest earned ratio

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Business

Haylie

15 May, 04:37

Gorilla Movers has sales of $645,560, cost of goods sold of $425,890, depreciation of $32,450, and interest expense of $12,500. The tax rate is 30 percent. What is the times interest earned ratio

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Answers (1)

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Franklin · Answer 1

14.98

Explanation:

The times interest earned is the number of times the net income or earnings before interest and taxes can be used to settle the interest expense of an entity.

This financial measure is given as the ratio of the earnings before interest and taxes to the interest accrued.

Given that

Sales = $645,560

cost of goods sold = $425,890,

depreciation = $32,450,

and interest expense of $12,500

Earnings before interest and tax = $645,560 - $425,890 - $32,450

= $187,220

The times interest earned ratio

= $187,220 / $12,500

= 14.98