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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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Harrison Co. issued 13-year bonds one year ago at a coupon rate of 8 percent. The bonds make semiannual payments. If the YTM on
alex41 [277]

Answer:

$1,197.94

Explanation:

For determining the current dollar price we have to applied the present value formula which is to be shown in the attachment below:

Given that,  

Future value = $1,000

Rate of interest = 5.7%  ÷ 2 = 2.85%

NPER = (13 years  - 1 years) × 2 = 24 years

PMT = $1,000 × 8% ÷2  = $40

The formula is shown below:

= -PV(Rate;NPER;PMT;FV;type)

After applying the above formula, the current dollar price of the bond is $1,197.94

6 0
3 years ago
Smith's operating cash flows in millions were $100, $150, $80 during the past three years; while Jones' operating cash flows in
Len [333]

Answer:

Smith

Explanation:

Cash flow at risk (CFaR) can be defined as the extent to which future cash flows may fall short of expectations as a consequence of changes in market variables. ... It generally focuses on the market risk that impacts the corporate's cash flows, ignoring things such as political, operational, environmental and legal risk

7 0
3 years ago
Which of the following demonstrates the ability to accept constructive criticism well?
VMariaS [17]

Answer:

Making eye contact with the speaker and showing positive body language

Explanation:

6 0
3 years ago
Mary's Mugs produces and sells various types of ceramic mugs. The business began operations on January 1, year 1, and its costs
vova2212 [387]

Answer:

Explanation:

a.

Direct Material cost per unit = Cost of Direct materials/ units produced = $3400/17000 mugs = $0.20 per mug

Direct material used per mug = 0.40 pounds

Direct material cost per pound = $0.20 / 0.40 = $0.50 per round

Direct material inventory = 3400 * $0.50 = $1700

b. Compute the finished goods ending inventory in units on December 31, year 1.

Finished Goods inventory (in units) = Finished goods inventory / manufacturing cost per unit

Manufacturing cost per unit = (Direct material + Direct Labour + Indirect manufacturing cost)/Units Produced

= ($3400+$25280+$1140+$4180)/17000 = $2 per unit

Finished Goods inventory (in unit) :

Year 1 = $6,000/$2 = 3000 units

c. Compute the selling price per unit.

Selling price per unit = Revenues / units sold

Units sold = Units produced - units in the ending finished goods inventory = 17000-3000 = 14000

Selling price per unit = $52,500/14000 = $3.75

d.Compute the operating profit (loss) for year 1

Operating income for the year :

Revenues  $52,500

Cost of goods sold (14000*$2)  (28000 )

-----------------------------------------------------------------

Gross Margin                          $24,500

Less marketing and administrative cost:  

Variable cost ($2,350)  

Fixed cost ($11,800)

-----------------------------------------

                                                  ($14,150)

Operating Profit  $10,350

7 0
3 years ago
Should underperforming restaurants be closed or sold?
crimeas [40]

Answer:

sold

Explanation:

Underperforming restaurants are those restaurants  which does not perform well. The restaurant does not run properly and no people or less people visits the restaurant for eating.

This can be due to several factors. The restaurant's location may not be good, the restaurant may not provide good quality and tasty food, or people might not find their required menu in that restaurant. All these factors leads to less people visiting the restaurant and less revenue generation.

In such a case, the owner of the restaurant must sell the restaurant to some other party so that he does not undergo any losses. By selling the property he will get some amount of his investment which he could utilize in his further projects.

Also by selling the restaurant, the employees of that restaurant will not go out of job and can feed their family.

So, the restaurant should be sold.

7 0
3 years ago
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