Sprout Company reported the following on the company's income statement in two recent years: Current Year Prior Year Interest expense $510,000 $480,000 Income before income tax expense 5,610,000 6,720,000 a. Determine the times interest earned ratio for the current year and the prior year. Current year Prior Year b. Is the times interest earned ratio improving or declining?
Sprout Company reported the following on the company's income statement in two recent years: Current Year Prior Year Interest expense $510,000 $480,000 Income before income tax expense 5,610,000 6,720,000 a. Determine the times interest earned ratio for the current year and the prior year. Current year Prior Year b. Is the times interest earned ratio improving or declining?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 9BE
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Question
Sprout Company reported the following on the company's income statement in two recent years:
Current Year | Prior Year | |||
Interest expense | $510,000 | $480,000 | ||
Income before income tax expense | 5,610,000 | 6,720,000 |
a. Determine the times interest earned ratio for the current year and the prior year.
Current year | |
Prior Year |
b. Is the times interest earned ratio improving or declining?
Expert Solution
Step 1 Question is based on Ratio Analysis
Time interest earned = (Income before interest and taxes/interest expense)
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