BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Times interest earned

The following financial data (in thousands) were taken from recent financial statements of Staples, Inc.:

  Year 3 Year 2 Year 1
Interest expense $ 173,751 $ 214.824 $ 237,025
Earnings before taxes      1,459,141 1,356,595 1,155,894

1. Determine the times interest earned ratio for Staples in Year 3, Year 2, and Year 1? Round your answers to one decimal place.

2. Evaluate this ratio for Staples.

1.

To determine

Times-Interest-Earned ratio: It is the ratio that quantifies a business ability to pay interest expense. It is calculated as shown below:

Times-interest-earned ratio}=Incomebeforeincometax+Interest expenseInterest expense

To determine: Times-interest-earned ratio for the Incorporation S in Year 1, Year 2, and Year 3.

Explanation

Determine the times-interest-earned ratio for the Incorporation S in Year 3, Year 2, and Year 1.

Year 3:

Earnings before taxes = $1,459,141

Interest Expense = $176,751

Times-interest- earned ratio}=Earningsbeforetaxes+Interest expenseInterest expense=$1,459,141+$173,751$173,751=9.4

Year 2

Earnings before taxes = $1,356,595

Interest Expense = $214,824

Times-interest- earned ratio}=Earningsbefore

2.

To determine

To evaluate: these ratios for Incorporation S.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What are some of the benefits and limitations of a team?

Foundations of Business (MindTap Course List)

Should an economic model describe reality exactly?

Principles of Economics (MindTap Course List)

What is data mining?

Accounting Information Systems

Why are convertibles and bonds with warrants typically offered with lower coupons than similarly rated straight...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)