A Company Had Fixed Interest Expense of $6,000, Its Income

question 34

Multiple Choice

A company had fixed interest expense of $6,000, its income before interest expense and any income taxes is $18,000, and its net income is $8,400. The company's times interest earned ratio equals:

• A) 0.33.
• B) 0.71.
• C) 1.40.
• D) 3.00.
• E) 12,000.

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Definitions:

Independent Contractor

An individual in business for themselves, who provides services to others under terms specified in a contract or agreement.

Control Over Work

The authority to direct and manage how a job or task is executed.

IRS Determination

An official decision made by the Internal Revenue Service on a specific tax matter.

Principal-Agent Relationship

A legal relationship where one party (the agent) acts on behalf of another party (the principal) in business transactions.