eBook Calculator Print Item Times interest earned Loomis, Inc. reported the foll

Question

eBook Calculator Print Item Times interest earned Loomis, Inc. reported the following on the company's income statement in two recent years: Current Year $267,000 4,245,300 Prior Year $320,400 5,446,800 Interest expense Income before income tax expense a. Determine the times interest earned ratio for the current year and the prior year. Round to one decimal plac Current year Prior year b. Is the number of times interest charges are earned improving or decining? Improving Check My work 5 more Check My Work uses remaning 5 more Check My Work uses remaining All work saved

Explanation / Answer

Solution :-   

Income before income tax expense

(+) Interest expense

4245300

267000

5446800

320400

a). Times interest earned ratio = Income before interest expense and tax expense / Interest expense.

Conclusion :-

b). Answer :- Times interest earned ratio is declining.

Explanation :- Times interest earned ratio is 16.9 Times for the current year as compared to 18.0 times in the prior year. Accordingly, Times interest earned ratio is declining.

Note :- Times interest earned ratio is also known as Interest Coverage Ratio.

Particulars Current year Prior year

Income before income tax expense

(+) Interest expense

4245300

267000

5446800

320400

Income before interest expense and tax expense 4512300 5767200

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