A firm reports sales of $1,240,116.00, COGS of $603,300.00, Selling and Administrative expense of $103,638.00, and...

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A firm reports sales of $1,240,116.00, COGS of $603,300.00, Selling and Administrative expense of $103,638.00, and...

A firm reports sales of $1,240,116.00, COGS of $603,300.00, Selling and Administrative expense of $103,638.00, and Depreciation expense of $203,445.00.

The firm’s creditors expect the TIE coverage ratio to be at least 1.80. What is the most the interest expense can be to satisfy this request?

business finance

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Answer 1

Answer #1

Sales	$1,240,116
Less:COGS	$603,300
Less:Selling and Administrative expense	$103,638
Less:Depreciation expense	$203445
EBIT	$329733

TIE=EBIT/interest expense

interest expense=$329733/1.8

which is equal to

=$183185.

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Answer 2

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