Ajax corp's sales last year were $510,000, its operating costs were $362,500, and its interest charges were $12,500. what was the firm's times-interest-earned (tie) ratio?a. 8.85b. 12.15c. 14.75d. 13.10e. 11.80
Question
Answer:
e. 11.80
The "times interest earned ratio" is calculated as EBIT / Interest Charges. To get EBIT, subtract $362,500 from $510,000 to get $147,500. Divide that by the interest charge of $12,500 and you get a TIE ratio of 11.80.
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