a Need help compute the interest coverage ratio Using the in

(a) Need help compute the interest coverage ratio

Using the income statement for Times Mirror and Glass Co., compute the following ratios: TIMES MIRROR AND GLASS Co Income Statement Sales Cost of goods sold Gross profit Selling and administrative expense Lease expense Operating profit* Interest expense Earnings before taxes Taxes (30%) Earnings after taxes Equals income before interest and taxes $ 223,000 130,000 $ 93,000 44,000 19,100 $ 29,900 10,600 $ 19,300 7.720 $ 11,580 a.Compute the interest coverage ratio. (Round your answer to 2 decimal places.) Interest coverage times b.Compute the fixed charge coverage ratio. (Round your answer to 2 decimal places.) Fixed charge coverage times

Solution

a. Interest coverage ratio= EBIT / Interest expenses

=29,900/10600=2.82

b.Fixed charge coverage ratio =[EBIT + Lease payment] / [ Interest + Lease expenses]

=29,900+19,100]/[19100+10600]

=49000/29700

=1.65