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Assuming a 32 percent income tax rate, what was the times interest earned ratio?

Business & Finance
Tutor: None Selected Time limit: 0 Hours

For the most recent year, Seether, Inc., had sales of $439,000, cost of goods sold of $219,200, depreciation expense of $58,900, and additions to retained earnings of $51,100. The firm currently has 24,000 shares of common stock outstanding, and the previous year’s dividends per share were $1.45.

Assuming a 32 percent income tax rate, what was the times interest earned ratio?

Apr 16th, 2015

                           Net sales  =  $439,000

Less: Cost of Goods Sold  =  $219,200

Gross Profit                        =  $219,800

Les: Depreciation Exps     =  $58,900

Net profit                             =  $160,900

Dividend paid as per previous year  =  $1.45 

Therefore total Dividend paid   =  No of common stock  X  Dividend per share

                                                 =  24,000   X   1.45

                                                 =  $34,800

Tax payment   =   160,900  X  (32/100)

                         =  $51,488  

Time interest Earned Ratio  =  Income before interest and Tax  /  Interest expenses

                                                 =  160,900 / 34,800

                                                 =  4.62 times

Apr 16th, 2015

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