In: Finance
Chilly Moose Fruit Producer has a total asset turnover ratio of 6.00x, net annual sales of $25 million, and operating expenses of $11 million (including depreciation and amortization). On its balance sheet and income statement, respectively, it reported total debt of $2.50 million on which it pays a 7% interest rate.
To analyze a company’s financial leverage situation, you need to measure the firm’s debt management ratios. Based on the preceding information, what are the values for Chilly Moose Fruit’s debt management ratios?
Ratio |
Value |
---|---|
Debt ratio | |
Times-interest-earned ratio |
Influenced by a firm’s ability to make interest payments and pay back its debt, if all else is equal, creditors would prefer to give loans to companies with times-interest-earned ratios (TIE).