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Cristo Company reported net income of $50,000 after subtracting $10,000 for interest expense and $20,000 for...

Cristo Company reported net income of $50,000 after subtracting $10,000 for interest expense and $20,000 for taxes. Compute the company's times‐interest‐earned ratio:

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Times- interest -earned ratio= Income before Interest and Taxes or EBIT

Interest Expense

Here, Cristo Company reported net income of $50,000 after subtracting $10,000 for interest expense and $20,000 for taxes, so for calculate income before interest and taxes, interest and taxes will be added to the net income:-

Net Income

$50,000
Add: Interest Expense $10,000
Add: Taxes $20,000
Income before interest and taxes $80,000

Times-interest-earned ratio= $80,000

10,000

=8 Times

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