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8 March, 22:07

Ajax Corp's sales last year were $435,000, its operating costs were $362,500, and its interest charges were $12,500. What was the firm's times-interest-earned (TIE) ratio? a. 4.72 b. 5.51 c. 5.80 d. 4.97 e. 5.23

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  1. 9 March, 01:38
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    c) 5.80

    Explanation:

    The net income for the year before interest is as follows:

    Sales $ 435,000

    Operating Costs $ 362,500

    Net Income before interest $ 72,500

    Interest Charges $ 12,500

    Times interest earned ratio is the net income divided by the interest amount. It indicates how much does the profitability cover the firm's interest expenses.

    Calculating Times interest earned is 72,500/12.500 = 5.8 times.
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