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lyudmila [28]
3 years ago
8

Park Company reports interest expense of $340,000 and income before interest expense and income taxes of $6,120,000.(1) Compute

its times interest earned.(2) Park's competitor's times interest earned is 12.0. Is Park in a better or worse position than its competitor to make interest payments if the economy turns bad
Business
1 answer:
algol133 years ago
7 0

Answer: 1. 18 times

2. Park is in better position

Explanation:

1. Times interest earned is a financial ratio that measures interest coverage. It's essentially to check if a company can pay it's debt payments and is calculated by either EBIT or EBITDA divided by the total interest expense. The higher the better and anything above 2.5 times is usually considered.

Calculating would therefore be,

= $6,120,000 /$340,000

= 18 times.

2. As mentioned in the first answer, for the Times interest earned, the higher it is, the more favourable it is. So Park Company will be considered safer and are most definitely in a better or worse position than its competitor to make interest payments if the economy turns bad. The fact that theirs is 18 means that they can pay off their interest expense 5 times more than their competitor who can only repay 12 times.

If you need any clarification do comment.

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A problem with creating team incentive plans is that:
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Magic Realm, Inc., has developed a new fantasy board game. The company sold 35,600 games last year at a selling price of $62 per
Natasha_Volkova [10]

Answer:

1a.

                              Magic Realm, Inc.,

                         Contribution format income statement

                                   Per Unit                    Amount

Sales                               62                         2,207,200

Variable expenses         42                         (1,495,200)

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Fixed expenses                                            (623,000)

Net operating profit                                      89,000

1b.

Degree of operating leverage: 4

2. The expected percentage increase in net operating income for next year: 184%  

Explanation:

1a. Please refer to the answer part

1b. Degree of operating leverage = Contribution margin / net operating profit = 712,000/89,000 = 8.

2.

Expected percentage increase in net operating income for next year = Expected percentage increase in sales next year x operating leverage = 23% x 8 = 184%

3 0
3 years ago
The current price of Janco stock is $16.77. Dividends are expected to grow at 4.4% indefinitely and the most recent dividend pai
SIZIF [17.4K]

Answer:

Required return= 28.87%

Dividend yield= 24.4658%

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Explanation:

Required return=(D1/Current price)+Growth rate

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Capital gains yield=Growth Rate

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