Calculate the Times Interest Earned Ratio Using the Following Information

question 133

Multiple Choice

Calculate the times interest earned ratio using the following information. Sales = $1.5 million, cost of goods sold = $800,000, depreciation expense = $100,000, addition to retained earnings = $85,000, dividends per share = $1.2, tax rate = 30 percent, and number of shares of common stock outstanding = 100,000. Assume the firm has no preferred stock.

• A) 2.25 times
• B) 1.25 times
• C) 1.95 times
• D) 2.75 times

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Definitions:

Neoclassical Economists

Economists who emphasize the importance of supply and demand as forces that regulate price levels and allocate resources in an efficient manner.

Computational Skills

The ability to use mathematical techniques and algorithms to solve problems and perform calculations.

Fairness

A person’s opinion as to whether a price, wage, or allocation is considered morally or ethically acceptable.

Systematic Errors

Suboptimal choices that (1) are not rational because they do not maximize a person’s chances of achieving his or her goals and (2) occur routinely, repeatedly, and predictably.