Chapter 15, Problem 7QC

To determine

Interest Earned Ratio: This ratio quantifies the number of times the earnings before interest and taxes can pay the interest expense.  Use the following formula to calculate times-interest-earned ratio:

$\begin{array}{l}\text{Times-interest-earned}\\ \text{ratio }\end{array}\}=\frac{\text{Net income}+\text{Income tax expense}+\text{Interest expense}}{\text{Interest expense}}$

The interest earned ratio

Given info: Net income, income tax expense, and interest expense.