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This year, Ferro Inc. generated sales of $10 million. Its fixed operating cost is $1 million and its variable cost ratio is 30 percent of
This year, Ferro Inc. generated sales of $10 million. Its fixed operating cost is $1 million and its variable cost ratio is 30 percent of sales. Ferro has $60 million of debt outstanding with a before-tax cost of 12 percent. Which of the following statements about Ferro's times interest earned (TIE) ratio is correct? a. Ferro's TIE ratio is 0.83 , which suggests it does not have enough earnings to meet the required interest payments. b. Ferro's TIE ratio is 0.83 , which suggests it has enough earnings to meet the required interest payments. c. Ferro's TIE ratio is 1.39 , which suggests it does not have enough earnings to meet the required interest payments. d. Ferro's TIE ratio is 1.20 , which suggests it has enough earnings to meet the required interest payments. e. Ferro's TIE ratio is 1.00 , which suggests it has just enough earnings to meet the required interest payments
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