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A corporation has $900,000 of debt outstanding, and it pays an interest rate of 6 percent...

A corporation has $900,000 of debt outstanding, and it pays an interest rate of 6 percent annually on its bank loan. The firm's annual sales are $4,200,000; its average tax rate is 30 percent; and its net profit margin on sales is 5 percent. If the company does not maintain a times interest earned (TIE) ratio of at least 4 times, its bank will refuse to renew its loan, and bankruptcy will result. What is this firm's current TIE ratio?

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Expert Solution

Time interest earned ratio : 6.55 times

Please find below explanation.

jeff jeffy answered 1 year ago
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