This answer results from reducing Earnings Before Interest and Taxes (EBIT) by income tax due on it based on the tax rate. in calculating the times interest earned (interest coverage) ratio, EBIT should not be reduced by income tax due on it.
The times interest earned ratio (interest coverage ratio) is EBIT / Interest Expense. Since EBIT and Interest Expense are the same, the company’s times interest earned ratio must be 1.0.
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This is not the correct answer. Please see the correct answer for an explanation. We have been unable to determine how to calculate this incorrect answer choice. If you have calculated it, please let us know how you did it so we can create a full explanation of why this answer choice is incorrect. Please send us an email at support@hockinternational.com. Include the full Question ID number and the actual incorrect answer choice -- not its letter, because that can change with every study session created. The Question ID number appears in the upper right corner of the ExamSuccess screen. Thank you in advance for helping us to make your HOCK study materials better.
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