ZMart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million. XMart had income before interest expense and income taxes of $3,596 million and interest expense of $1,143 million. Calculate the times interest earned for each company and comment on the results.

Question

Wendy Grissom · Accepted Answer

Final Answer :

ZMart times interest earned = $12,581/$1,063 = 11.8
XMart times interest earned = $3,596/$1,143 = 3.1
ZMart's times interest earned is almost four times that of Xmart. Neither company appears to have a very high risk of default on debt, but ZMart appears to have much lower risk Xmart.

Definitions

Learning Objectives

Learning Objectives

Related questions