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For the most recent year, David Enterprises had sales of $689,000, cost of goods sold of...

For the most recent year, David Enterprises had sales of $689,000, cost of goods sold of $470,300, depriciation expense of $60,000 and additions to retained earnings of $48,700. The firm currently has 12,000 shares of common stock outstanding, and the previous year’s dividends per share was $1.5.
Assuming a 35% tax rate, what is the times interest earned ration?
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Answer #1
EBIT
Sales revenue 689000
Less: Cost of goods sold 470300
Less: Depreciation 60000
EBIT 158700
Income before tax:
Addition to RE 48700
Add: Dividend paiid (12000*1.50) 18000
Net Income after tax 66700
Add: tax (66700/65*35) 35915
Before tax Income 102615
Interest expense= 158700-102615 = 56085
Times interest earned = Net income bfore interest and tax/ Interest expense
158700 /56085= 2.83 times
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