In the past year, TVG had revenues of $3.04 million, cost of goods sold of $2.54...

In the past year, TVG had revenues of $3.04 million, cost of goods sold of $2.54 million, and depreciation expense of $130,280. The firm has a single issue of debt outstanding with book value of $1.04 million on which it pays an interest rate of 9%. What is the firm’s times interest earned ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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Expert Solution

Times Interest Earned Ratio is 3.95

Working:

Times-Interest earned Ratio	=	EBIT	/	Interest
	=	$3,69,720	/	$93,600
	=	3.95

Working:

EBIT stands for Earning Before Interest aand Taxes.

EBIT is calculated as follows:

Revenues		$30,40,000
Cost of goods sold		$25,40,000
Gross Profit		$5,00,000
Depreciation		$1,30,280
EBIT		$3,69,720


Interest	=	Book Value of debt	*	Interest Rate
	=	$10,40,000	*	9%
	=	$93,600

jeff jeffy answered 1 year ago

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