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. 8.85 b. 12.15 c. 14.75 d. 13.10 e. 11.80

Times interest earned ratio for Ajax corp's: 11.8

The times interest earned ratio is the amount of income that can be used to cover interest expenses

This figure also shows a company's ability to make interest and debt service payments

The higher the ratio, the better the company can pay its interest expense,

If a company for example has a Times interest earned ratio of 5, the company's income is 5 times greater than its annual interest expense

Usually this is a reference from the bank / creditor to accept the loan application from the company, because the high ratio shows the company has a low risk to pay its interest payments

Ajax corp's sales last year were $ 510,000, its operating costs were $ 362,500, so the income before interest and income taxes is:

EBIT = $ 510,000 - $ 362,500 = $ 147500

interest charges = $ 12,500

Times interest earned ratio = $ 147500 / $ 12500

Times interest earned ratio = 11.8 (E)

the times interest earned ratio

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calculate the financial ratios

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the amount of interest earned

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Keywords: Times interest earned ratio, payments, taxes, expense, debt service

it is b)

hope this : )

step-by-step explanation: