Calculate the times-interest-earned ratio for each year and also state the perce

Question

Calculate the times-interest-earned ratio for each year and also state the percentage change in the ratio.

                                                                                   31, 2016         31, 2017

Net Income                                                                $ 81,510       $ 210,570

Income Tax Expense                                                    55,910          103,505

Interest Expense                                                             6,595            59,505

EBIT                                                                         $ 144,015       $ 373,580

Times-interest-earned ratio (EBIT / Interest Expense)   xx               xx

Percentage Change [(xx - xx) / xx × 100 ]                       xx%

Explanation / Answer

Times Interest earned ratio

2016 = 144014 / 6595   = 21.84

2017 = 373580/ 59505 = 6.28

%change = [(6.28 - 21.84) / 21.84 *100]

                   = 15.56 /21.84   * 100

                   = .7125 *100

                     = 71.25%

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