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Net income after tax was $400,000 and Income Tax Exp 140,000 & Interest paid was $60,000. What is the times interest earned? a. 6.7 b. 9.0 c. 10.0

Accounting Auditing Cost Accounting Financial Accounting managerial accounting
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Question added by Khurrum Iqbal , Accountant , Akun Logistic Services
Date Posted: 2014/12/04
Upvote (0) Views (7) Followers (7) Answers (7) Report Question
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Times Interest Earned = EBIT / Interest Expense

in this case EBIT = $ (400000+140000+60000) = $600000

Therefore, times interest earned would be600,000 /60,000 =10 Times 

Also known as Interest Coverage Ratio

Mir Mujtaba Ali
by Mir Mujtaba Ali , Internal Audit Manager , Confidential

c

MALIIK SOHAIL ABBAS
by MALIIK SOHAIL ABBAS , ACCOUNTS MANAGER , AL RAWDAH GREEN SWEET WATER

option b is the correct answer

 

Muhammad Sajjad
by Muhammad Sajjad , Chief Accountant , Hassan Kabbani Est. for Gen. Const. of Buildings (IKK Group of Companies)

Option C is correct answer >>>

 

Income before Tax was=600000 (Tax+Interst+Net Income after tax)

 

So, Interst X100/Income before tax & Interst paid

60000 x100 /600000=10%

Faraz Sultan
by Faraz Sultan , Audit and Accounts Manager , Abdulla Al Mulla Auditing Of Accounts

C.10

Lesley Lanag CMA CPA
by Lesley Lanag CMA CPA , Senior Accountant , Takaful Emarat Insurance (P.S.C)

I agree with Mr.  Malik :) 

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