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marks Window Help Quiz: Exam 2 -tructure.com/courses/1323846/quizzes/1748642/take ????????? Yahoo > ??????? ? ????? ????? USFS Qu Question 8 5 pts Ajax Corp's sales last year were $435,000, its cost of goods sold plus depreciation and amortization were $362,500, and its interest charges were $12,500. What was the firm's times- interest-earned (TIE) ratio? 0 4.72 4.97 5.23 5.51 5.80 Question 9 5 pts Chang Corp. has $575,000 of assets, and it uses only common equity capital (zero debt). Its sales last year were $795.000 JOOQALOQ

Explanation / Answer

question 9.

EBDIT (earning before depreciation; interest and tax) = $435000

less:-

cost and depreciation = ($362500)

EBIT = $72500

INTEREST =$12500

FIRMS TIMES INTEREST EARNED RATIO (EBIT / INTEREST) =5.8TIMES

I.E. 5.8times a firms earnings can cover the interest. higher the ratio safer the debt.

7.

debt ratio = total liabilities / total assets

total liabilities = 0.4* $720000

total debt can be borrowed = $288000

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