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The following data were taken recent annual reports of Southwest Airlines, which operates a low-fare airline service to 50 cities in the United states:

Determine the number of times interest charges are earned for the current and preceding years.

(Round to one decimal place.)

Current year

Interest Expense $200,000,000
Income before income taxes $845,000,000
Determine the number of times interest charges are earned for the current year

a. 5.6

b. 5.2

c. 5.8

d. 4.1

Respuesta :

TomShelby

Answer:

b. 5.2

Explanation:

First we need to Calculate the Income before interest and taxes,

so we have to add the interest expense to get EBIT

then we calculate the TIE Times Interest Earned

[tex]TIE = \frac{EBIT}{interest \: expense} \\\\EBIT = EBT + Interest \: expense\\\\EBIT = 845,000,000 + 200,000,000\\EBIT = 1,045,000,000\\\\TIE = \frac{1,045,000,000}{200,000,000} = 5.225[/tex]

For rounding reasons, option "B" should be correct.

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