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A company's income before interest expense and income taxes is $200,000 and its interest expense is $70,000. Its times interest earned ratio is:__________

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ayokenny2001

Answer:

2.86

Explanation:

The times interest earned ratio is used basically to measure a firm's capacity to pay up it's debt. In other words, it is a covenant for loan which is primarily used by lenders to their debtors.

Times interest earned is calculated by dividing income before interest expense and income taxes by interest expense

= $200,000 / $70,000

= 2.86

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