10. Times-interest-earned (TIE) ratio The times-interest-earned (TIE) ratio shows how well a firm can cover its interest payments with operating income Compare the income statements of Black Sheep Broadcasting Company and Purple Panda Importers and calculate the TIE ratio for each firm Black Sheep Broadcasting Company Income Statement For the Year Ended on December 31 Net Sales Variable costs Fixed costs Total Operating Costs Operating Income (or EBIT) Less interest Earnings before Taxes (EBT) Less taxes (40%) Net Income Times Interest Earned (TIE) (Millions of dollars) 1050 420 367.5 $787.50 262.5 50 212.5 85 127.5 Purple Panda Importers Income Statement For the Year Ended on December 31 Net Sales Variable costs Fixed costs Total Operating Costs Operating Income (or EBIT) Less interest Earnings before Taxes (EBT) Less taxes (40%) Net Income (Millions of dollars) 850 212.5 382.5 $595.00 255 100 155 62 93 Screenshot Chapter 12 ASslghmen Purple Panda Importers Income Statement For the Year Ended on December 31 Net Sales Variable costs Fixed costs Total Operating Costs Operating Income (or EBIT) Less interest Earnings before Taxes (EBT) Less taxes (40%) Net Income Times Interest Earned (TIE) (Millions of dollars) 850 212.5 382.5 $595.00 255 100 155 62 93 Complete the following statement, based on the calculations you have already made Describe the relationship between the TIE ratios of the two companies The companies have equal TIE ratios Black Sheep Broadcasting Company has a greater TIE ratio than Purple Panda Importers Purple Panda Importers has a greater TIE ratio than Black Sheep Broadcasting Company Which company is in better position to cover its interest payments, and therefore exhibits lower risk, than the other? Purple Panda Importers is in a better position to cover its interest payment. Black Sheep Broadcasting Company is in a better position to cover its interest payment. Both companies are equally positioned to cover their interest payments Screenshot ave&Continue Grade Continue without saving