Question
Asked Dec 20, 2019
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Loomis, Inc. reported the following on the company’s income statement in two recent years:

Please see the image for details:

a. Determine the times interest earned ratio for the current year and the prior year. Round to one decimal place.
b. Is this ratio improving or declining?

Current Year
Prior Year
$ 13,500,000
$ 16,000,000
Interest expense
Income before income tax expense
432,000,000
310,500,000
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Current Year Prior Year $ 13,500,000 $ 16,000,000 Interest expense Income before income tax expense 432,000,000 310,500,000

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Expert Answer

Step 1

a.

Calculate interest earned ratio for current year a...

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Times-interest- earned Incomebeforeincometax + Interest expense ratio for current year Interest expense $310,500,000+S13,500,000 S13,500,000 = 24.0 Times-interest- earned Incomebeforeincometax + Interest expense ratio for pri or year Interest expense $432,000,000+$16,000,000 $16,000,000 = 28.0

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