Question

Using the income statement for Times Mirror and Glass Co., compute the following ratios:

Answer 1

Answer:

a.  9.15 times

b. 4.61 times

c. 31.52%

d. 1.08 times

e. 20.88 %

Explanation:

Note : I have attached the full question as image below.

Interest Coverage = Earnings Before Interest and tax ÷ Interest expense

                               = $85,100 ÷ $9,300

                               = 9.15 times

Fixed Charge Coverage = EBIT + Lease Payments ÷ Interest Payments + Lease Payments

                                        = $85,100 + $11,700 ÷ $9,300 + $11,700

                                        = 4.61 times

Profit margin = Operating Profit / Sales x 100

                       = $85,100 / $270,000 x 100

                      = 31.52%

Total asset turnover = Sales ÷ Total Assets

                                   = $270,000 ÷ $249,000

= 1.08 times

Return on assets (investment) = Earning Before Interest after Tax / Total Assets x 100

                                                  = ($45,480 + $9,300 x 70%) / $249,000 x 100

                                                  = 20.88 %