Question
Problem 3-10 Times-Interest-Earned Ratio The Morris Corporation has $600,000 of debt outstanding, and it pays an interest rate of 10% annually. Morris's annual sales are
Problem 3-10
Times-Interest-Earned Ratio
The Morris Corporation has $600,000 of debt outstanding, and it pays an interest rate of 10% annually. Morris's annual sales are $3 million, its average tax rate is 35%, and its net profit margin on sales is 4%. If the company does not maintain a TIE ratio of at least 4 to 1, its bank will refuse to renew the loan and bankruptcy will result. What is Morris's TIE ratio? Do not round intermediate calculations. Round your answer to two decimal places.
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Foundations of Finance The Logic and Practice of Financial Management
Authors: Arthur J. Keown, John D. Martin, J. William Petty
8th edition
132994879, 978-0132994873
