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A Company's Income Before Interest Expense and Income Taxes in Year

question 171

Essay

A company's income before interest expense and income taxes in Year 1 and Year 2 is $225,000 and $250,000,respectively.Its interest expense was $45,000 for both years.Calculate the company's times interest earned ratio,and comment on its level of risk.


Definitions:

Availability

The state of being ready for use or accessible for a certain purpose or need.

Performance Contingency

A condition where the outcome or rewards depend on the level of performance achieved.

Consistency

The quality of always acting or behaving in the same way, leading to predictability in one's actions or responses.

Goal Setting

A process of identifying specific outcomes or achievements that an individual or organization aims to reach.

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