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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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