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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.)

Solutions

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 2 years ago
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