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Q13SE

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Horngren'S Financial And Managerial Accounting
Found in: Page 606

Short Answer

Question:Abernathy Electronics reported the following amounts on its 2018 income statement: Year Ended December 31, 2018 Net income $ 45,000 Income tax expense 6,750 Interest expense 3,750 What is Abernathy’s times-interest-earned ratio for 2018? (Round to two decimals.)

Answer

Times interest earned ratio is 14.80.

See the step by step solution

Step by Step Solution

Step 1: Definition

The interest coverage ratio, sometimes referred to as the times interest earned (TIE) ratio. It gauges how readily a business can settle its debts with its current income.

Step 2: Calculation of Times interest earned ratio:

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