2 For the most recent year Seether Inc had sales of 445000 c

2. For the most recent year, Seether, Inc., had sales of $445,000, cost of goods sold of $218,600, depreciation expense of $58,300, and additions to retained earnings of $50,500. The firm currently has 30,000 shares of common stock outstanding, and the previous year\'s dividends per share were $1.25. Assuming a 34 percent income tax rate, what was the times interest earned ratio? (Do not round intermediate calculations and round your answer to 2 decimal places,-g 32.16.) Times interest earned

Solution

Net Income before interests and tax: Additions in Retained earnings 50500 Add: Dividend paid (30000*1.25) 37500 Net Income after tax 88000 Add: Tax (88000/66% *34%) 45333 Net Income aafter tax 133333 Less: Net Income before tax Sales 445000 Less: Cost of goods sold 218600 Less: Depreciation 58300 Net Income before tax and interest 168100 Therefore, Interest expense 34767 Times interest ratio: Net income before interest and tax / Interest expense 168100 / 34767 = 4.84 times