The company's times interest earned ratio equals 4.75.
Times interest earned ratio = Income before interest expense and income taxes / Interest expense = 52,250 / 11,000 = 4.75.
A company's ability to continuously pay off its debt is measured by the Times Interest Earned (TIE) ratio. This ratio is calculated by dividing a company's EBIT by its recurrent interest expense.
The ratio is the theoretical frequency with which a company would have to make periodic interest payments if it applied 100% of its EBIT to debt repayment.
The TIE's primary goal is to calculate a company's default risk. As a result, it is simpler to determine crucial debt features, such as the appropriate interest rate to use or the maximum amount of debt a company may take on before going bankrupt.
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Answer: because it forces firms to achieve maximum efficiency (productive and allocative efficiency). Requires that goods be produced in the least costly way. Firms are forced to produce at the minimum average total cost in the long run.
Explanation:
Answer:
Sales $869,000
Cost of goods sold 480,000
Gross profit 389,000
Direct expenses 268,000
Common expenses 123,000
Total expenses 391,000
Net loss $(2,000)
Net loss reduces to $2,000 from $28,000.
There is a benefit of $26,000 gained through increased sales.