19. Temple, Inc. has sales of $329,000, cost of goods sold of $204,000, depreciation of $5,900, and interest expense of $15,100. The tax rate is 34 percent. What is the times interest earned ratio? (Please calculate the arithmetic solution and show your work)
To calculate the times interest earned ratio, you need to divide the earnings before interest and taxes (EBIT) by the interest expense.
First, let's calculate the EBIT:
EBIT = Sales - Cost of Goods Sold - Depreciation
EBIT = $329,000 - $204,000 - $5,900
EBIT = $119,100
Next, let's calculate the times interest earned ratio:
Times Interest Earned Ratio = EBIT / Interest Expense
Times Interest Earned Ratio = $119,100 / $15,100
Times Interest Earned Ratio = 7.88
Therefore, the times interest earned ratio is 7.88.