   Chapter 14, Problem 14.7CP

Chapter
Section
Textbook Problem

Times interest earnedThe 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.

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