(a) Need help compute the interest coverage ratio Using the income statement for
ID: 2398534 • Letter: #
Question
(a) Need help compute the interest coverage ratio
Using the income statement for Times Mirror and Glass Co., compute the following ratios: TIMES MIRROR AND GLASS Co Income Statement Sales Cost of goods sold Gross profit Selling and administrative expense Lease expense Operating profit* Interest expense Earnings before taxes Taxes (30%) Earnings after taxes Equals income before interest and taxes $ 223,000 130,000 $ 93,000 44,000 19,100 $ 29,900 10,600 $ 19,300 7.720 $ 11,580 a.Compute the interest coverage ratio. (Round your answer to 2 decimal places.) Interest coverage times b.Compute the fixed charge coverage ratio. (Round your answer to 2 decimal places.) Fixed charge coverage timesExplanation / Answer
a. Interest coverage ratio= EBIT / Interest expenses
=29,900/10600=2.82
b.Fixed charge coverage ratio =[EBIT + Lease payment] / [ Interest + Lease expenses]
=29,900+19,100]/[19100+10600]
=49000/29700
=1.65
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