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Times-Interest-Earned Ration Calculated the times-interest-earned ratio for Smith & Sons Inc for 2015 and 2016 and comment on the...

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Accounting

Times-Interest-EarnedRation
Calculated thetimes-interest-earned ratio for Smith & Sons Inc for 2015 and2016 and comment on the company’s ability to pay its currentinterest payments. Did the company’s ability to pay its currentinterest changes improve?
Time interest earned ration =Income before interest expense and income taxes/Interestexpense
Smith & Sons, Inc
Balance Sheet
Decemober 31, 2016 and2015
(In millions)20162015
Net sales         10,000          9,500
Cost of goods sold         (5,500)         (5,200)
Gross profit          4,500          4,300
Selling and administrativeexpenses         (2,800)         (2,700)
Income from operations          1,700          1,600
Interest expense            (300)           (250)
Income before incometaxes          1,400          1,350
Income tax expenses            (420)           (400)
Net Income              980              950

Answer & Explanation Solved by verified expert
3.6 Ratings (470 Votes)
Calulation of Income Before Interest and Income Taxes In millions 2016 2015 Income Before Income Taxes 1400 1350 Add Interest Expense 300 250 Income Before Interest and Income Taxes 1700 1600 Times Interest Earned Ratio Income before interest    See Answer
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