Question

In: Finance

Selected financial statement data for KRJ Enterprises are listed below. Calculate the debt service coverage ratio....

Selected financial statement data for KRJ Enterprises are listed below. Calculate the debt service coverage ratio. Present your answer rounded to two decimal places. e.g. 20.00.

Sales $12,866

Cost of goods sold 9,015

Cash operating expenses 1,969

Depreciation and amortization expense 327

Interest expense 171

Tax expense 232

Footnotes report that $165 of lease expenses are included in cash operating expenses, $21 of interest expenditures were capitalized during the year, and $296 of debt was repaid during the year.

Solutions

Expert Solution

DSCR ( Debt Service Coverage Ratio)

Step 1: Prepare Company Income Statement

Company KRJ Enterprises Income Statement
Assets Amount $
Sales 12,866
Cost of Goods Sold 9,015
Gross Profit =3851 [12,866-9,015]
Operating Expenses 1,969
Operating Income = 1882 [3,851-1,969]
D&A Expense 327
Intrest Expense 171
Pre-Tax Profit = 1384 [1,882-327-171]
Tax Expense 232
Net Income = 1152 [1,384-232]

Step 2: Find the DSCR

Formula to calculate DSCR:

DSCR = Net Operating Income / Debt Service

Net Operating Income = 1,882

Debt Service (Intrest Expense) = 171

DSCR = Net Operating Income / Debt Service
DSCR = 1,882 / 171 = 11.01

***


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