Question

eBook Problem Walk-Through Thomson Trucking has $23 billion in assets, and its tax rate is 35% lts basic earning power BE interest-earned (TIE) ratio? Round your answer to two decimal places. ratio is 13% and its re mon assets ROA 157 what tsimes

Answer 1

Assets = $23 billion

Basic Earning Power Ratio = 13%

EBIT/Total Assets = 13%

EBIT/23 billion = 13%

EBIT = $2.99 billion

Return on Assets = 7%

Net Income/Assets = 7%

Net Income/23 billion = 7%

Net Income = $1.61 billion

Tax Rate = 35%

Earnings before tax = 1.61/0.65

= $2.48 billion

Interest Expense = EBIT - EBT

= $2.99 billion - 2.48 billion

= $0.51 billion

Times Interest Earned ratio = EBIT/Interest

= 2.99 billion/0,51 billion

= 5.86 times