For the most recent year, ICU Windows, Inc., had sales of $380,000, cost of goods sold of

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For the most recent year, ICU Windows, Inc., had sales of $380,000, cost of goods sold of $110,000, depreciation expense of $32,000, and additions to retained earnings of $41,620. The firm currently has 30,000 shares of common stock outstanding, and the previous year’s dividends per share were $1.50. Assuming a 34 percent income tax rate, what was the times interest earned ratio?

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The times interest earned TIE ratio is a measure of a companys ability to cover its interest expenses with its earnings before interest and taxes EBIT It is calculated using the following formula TIE Ratio EBIT Interest Expense In your case we are given the sales cost of goods sold depreciation expense additions to retained earnings the number of shares outstanding and the previous years dividends per share To calculate the TIE ratio we need to determine EBIT first First calculate EBIT EBIT Sales Cost of Goods Sold Depreciation Expense EBIT 380000 110000 32000 EBIT 238000 Now we have EBIT but we still need to find the interest expense ...View the full answer

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