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    peteyflavor's Avatar
    peteyflavor Posts: 4, Reputation: 1
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    #1

    Jan 19, 2011, 05:17 PM
    Finance question??
    Culver Inc. has earnings after interest but before taxes of $300. The company's times interest earned ratio is 7.00. Calculate the company's interest charges.
    Alty's Avatar
    Alty Posts: 28,317, Reputation: 5972
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    #2

    Jan 19, 2011, 05:31 PM

    Is this homework?
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    peteyflavor Posts: 4, Reputation: 1
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    #3

    Jan 19, 2011, 10:23 PM
    Comment on Altenweg's post
    Yes
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    #4

    Jan 19, 2011, 10:26 PM

    Please see the rules for homework posted on this site. Link below;

    https://www.askmehelpdesk.com/math-s...-b-u-font.html
    arunavcd's Avatar
    arunavcd Posts: 89, Reputation: 3
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    #5

    Jan 21, 2011, 11:52 AM
    Very Simple Math
    Culver Inc. has earnings after interest but before taxes of $300. The company's times interest earned ratio is 7.00. Calculate the company's interest charges.


    Here,
    Time Interest Earned (TIE) is 7
    Formula for TIE is EBIT/I

    We take Interest as X for our calculation purpose:

    Putting into the formula as above:

    7 = [EBT 300 + X] / X

    So, 7X = 300 + X

    7X - X = 300

    6X = 300

    X = 300/6

    Or, X = 50


    So, Interest Charges were 50. (The Final Answer you are looking for)


    Now to prove,

    EBT 300
    Interest 50
    EBIT 350


    So, Interest Cover is: EBIT/Interest

    or 350/50 = 7

    Clear??

    Regards,

    Arunav
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