In a recent year, Bonita Industries had net income of $757,000, interest expense of $157,000, and...

Question:

In a recent year, Bonita Industries had net income of $757,000, interest expense of $157,000, and a times interest earned ratio of 7. What was Bonita Industries' income before taxes for the year?

a) $742,000.

b) $1,099,000.

c) $942,000.

d) None of these answers are correct.

Net Income:

The net income is used to calculate various ratios and also used to prepare the financial report of the company. It is calculated by preparing the income statement at the end of the period.

Answer and Explanation:

Using the formula of times interest earned ratio:

Times interest earned ratio = EBIT / Total Interest Expenses

7 = EBIT / 157,000

EBIT = $1,099,000

hence the correct option is b.


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Financial Ratio Calculation and Analysis

from Business 110: Business Math

Chapter 8 / Lesson 5
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