Answer:
The Times-Interest-Earned Ratio or Interest Coverage Ratio is 8.76.
Explanation:
It is calculated by the following formula:
EBIT / Interest Expenses
where EBIT is the Earnings Before Interest and Taxes. It means that you have to deduct all the remaining expenses including manufacturing, operating, and non-cash.
In this case, simply deduct Depreciation & Amortization expenses from EBITDA and you will get EBIT. Now divide the result by Interest Expense and you will be provided with a value of 8.76. It means that for each dollar of interest, the company generates $8.76 of Earnings.
Some authors argue to divide EBITDA by Interest Expenses instead of EBIT. But it is not supported mainly.
Thanks!
Answer:
8.76
Explanation:
The times interest earned is a financial ratio that shows how many times over the net income before interest and taxes can be used by an entity to settle its interest expense. It is given as the ratio of earnings before interest and taxes (EBIT) to the interest expense.
EBIT = $1,521,087 - $522,311
= $998,776
Therefore, the times-interest-earned for this company
= $998,776/$114,077
= 8.76
