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Andrei [34K]
3 years ago
9

The 3G Co. has $2,000,000 of assets, and its tax rate is 40%. Its basic earnings power ratio is 16%,and its ROA is 8%. What is i

ts TIE ratio
Business
1 answer:
Nina [5.8K]3 years ago
5 0

Answer: 6%

Explanation:

The Times Interest Ratio is calculated by the formula;

= \frac{EBIT}{Interest}

Earnings Before Interest and Tax (EBIT)

BEP ratio = \frac{EBIT}{Total Assets}

EBIT = BEP ratio * Total Assets

= 16% * 2,000,000

= $320,000

Interest

(EBIT- Interest)(1- Tax rate) = Net income

EBIT - Interest = \frac{Net income}{(1- Tax rate)}

Interest = EBIT - \frac{Net income}{(1- Tax rate)}

Net Income = ROA * Total Assets

= 8% * 2,000,000

= $160,000

Interest = EBIT - \frac{Net income}{(1- Tax rate)}

= 320,000 -  \frac{160,000}{(1- 0.4)}

= $53,333.33

Times Interest Ratio = \frac{EBIT}{Interest}

= \frac{320,000}{53,333.33}

= 6%

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2/12

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3 years ago
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Kathy purchased a $2,000 digital TV from Young's Appliances. She will make 12 equal payments over the next year to pay for it. S
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Answer:

A. closed-end credit

Explanation:

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Since in the question it is mentioned that she would make the payment in 12 equal payments so here she is using closed-end credit

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3 0
3 years ago
There are four consumers willing to pay the following amounts for haircuts, and there are four haircutting businesses with the f
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Based on efficiency, the businesses that should cut hair are the A and C; moreover, to meet the demand, each firm will need to offer at least two haircuts.

The supply of a product or the units of a product that is offered to potential customers should always meet the number of real customers. In the same way, the price of the product should meet the price customers are willing to pay.

In this context, the best is that only firm A and C cut hair, this is because their prices per cut ($25 and $30) match the consumers' willingness to pay this includes Lorenzo ($35), Gilberto ($50), Juanita ($40) and Neha ($25).

  • Firm A can cut Neha's and Lorenzo's hair
  • Firm C can cut Gilberto's and Juanita's hair

Moreover, this implies each firm needs to do at least 2 haircuts to cover all the possible customers.

In the case of firms B and D, the price per cut is high ($40 - $45). Based on this,  they should not cut hair as only a few customers can pay for this service, and this would be inefficient.

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4 0
2 years ago
The more conservative a firm's management is, the higher its total debt to total capital ratio [measured as (Short-term debt Lon
PtichkaEL [24]

Answer:

False

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So their no absolute argument whether the denominator will increase or the nominator will increase in the Total debt to capital ratio. Hence the statement is false.

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