Answer (D) is correct . The interest coverage ratio is computed by dividing earnings before interest and taxes by interest expense. Net income of $385, minus the disposal gain of $210, is added to income taxes of $120 and interest expense of $50 to produce a ratio numerator of $345. Dividing $345 by $50 results in an interest coverage of 6.90 times.
Answer (A) is incorrect because This figure is the debt ratio.
Answer (B) is incorrect because This figure is based on net income from operations after taxes and interest.
Answer (C) is incorrect because This figure results from not adding interest and taxes to net income after the gain on disposal is subtracted.
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The times interest earned ratio for Ostrander Corporation for Year 2 is
