Answer:
The firm's fixed-charge coverage ratio is 7.89 times
Explanation:
Fixed charge coverage ratio : This ratio deals with fixed payments like: interest payments, lease payments which is before earning before income and taxes.
The formula to compute the fixed charge coverage ratio is shown below:
= (EBIT + Fixed charges) ÷ (Fixed charges + interest expense)
= ($400,000 + $50,000) ÷ ($50,000 + $7,000)
= $450,000 ÷ $57,000
= 7.89 times
The total of fixed charge include depreciation expense also. Thus it would not be taken into computation part.
Hence, the firm's fixed-charge coverage ratio is
Answer:
The firm's fixed-charge coverage ratio is 7.89 times
Explanation:
Fixed charge coverage ratio : This ratio deals with fixed payments like: interest payments, lease payments which is before earning before income and taxes.
The formula to compute the fixed charge coverage ratio is shown below:
= (EBIT + Fixed charges) ÷ (Fixed charges + interest expense)
= ($400,000 + $50,000) ÷ ($50,000 + $7,000)
= $450,000 ÷ $57,000
= 7.89 times
The total of fixed charge include depreciation expense also. Thus it would not be taken into computation part.
Hence, the firm's fixed-charge coverage ratio is 7.89 timesAnswer:
The firm's fixed-charge coverage ratio is 7.89 times
Explanation:
Fixed charge coverage ratio : This ratio deals with fixed payments like: interest payments, lease payments which is before earning before income and taxes.
The formula to compute the fixed charge coverage ratio is shown below:
= (EBIT + Fixed charges) ÷ (Fixed charges + interest expense)
= ($400,000 + $50,000) ÷ ($50,000 + $7,000)
= $450,000 ÷ $57,000
= 7.89 times
The total of fixed charge include depreciation expense also. Thus it would not be taken into computation part.
Hence, the firm's fixed-charge coverage ratio is 7.89 timesAnswer:
The firm's fixed-charge coverage ratio is 7.89 times
Explanation:
Fixed charge coverage ratio : This ratio deals with fixed payments like: interest payments, lease payments which is before earning before income and taxes.
The formula to compute the fixed charge coverage ratio is shown below:
= (EBIT + Fixed charges) ÷ (Fixed charges + interest expense)
= ($400,000 + $50,000) ÷ ($50,000 + $7,000)
= $450,000 ÷ $57,000
= 7.89 times
The total of fixed charge include depreciation expense also. Thus it would not be taken into computation part.
Hence, the firm's fixed-charge coverage ratio is 7.89 times
