Need help interpreting and calculating Times interest earned

Need help interpreting and calculating Times interest earned ratio and fixed asset turnover ratio for letter B below:

Based on scanned pictures below:

Solution

Fixed Asset Turnover Ratio (FAT ratio)

It basiclly means the ability of business to generate net sales from aailable fixed asset like property and equipments.

hence, FAT Rtio = Net revenue/ Net Properties, equipments

= 28613/5924

=4.83 times.

as compared to industry, it is decent. It simply means that the company has used fixed assets to generate sales of 4.83 times of its value.

Time interest earned ratio

It measures the ability of business to repay debts. it is also called interest coverage ratio.

TIE Rario = EBIT / Interest Liability

EBIT = Net Income (1218)+ Interest (385) = 1603

=1603/385

TIE Ratio = 4.16

Hence, it means that the company has taken some loan for which they are paying interest of 385, but have developed the business so as it earns 4.16 times the servicing cost.

I hope the calculations and explaination are sufficient. Pls let me know if any further doubts.