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Beech Company provided the following income statement for last year:
| Sales | $24,350,735 |
| Cost of goods sold | 15,300,000 |
| Gross margin | $9,050,735 |
| Operating expenses | 4,910,685 |
| Operating income | $4,140,050 |
| Interest expense | 498,015 |
| Income before taxes | $3,642,035 |
| Income taxes | 1,461,214 |
| Net income | $2,180,821 |
Required:
Calculate the times-interest-earned ratio. Round the answer to one decimal place.
times
Expert Answer
Times interest earned ratio = EBIT / Interest
EBIT = Sales – cost of goods sold – operating expenses
EBIT = $24,350,735 – 15,300,000 – 4,910,685
EBIT = $4,140,050
Times interest earned ratio = EBIT / Interest = $4,140,050 / 498,015 = 8.3
