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Calculate Target’s times interest earned ratio. The average ratio for companies in the Discount Retailers industry...

Calculate Target’s times interest earned ratio. The average ratio for companies in the Discount Retailers industry sector in a comparable time period was 6.9. Comment on Target’s position relative to its industry with regards to this ratio.

https://corporate.target.com/_media/TargetCorp/annualreports/2018/pdfs/2018-Annual-Report-10-K.pdf

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Answer #1
$ in millions
Particulars year 2018
Earning before interest and tax (EBIT) $ 4,137.00
Net interest expense $     461.00
Times Interest Earned 8.97 times
=EBIT/Net Interest Expense

Target's Times interest earned ratio is 8.97 times as compared to 6.9 times of industry, which is a good sign for company.

As this ratio states that how much times the operating income is more than the interest expense. the more it is the better it looks for Investors and potential investors ,who are planning to lend funds to the company. Moreover, a company having a good interest coverage ratio finds it easy in raising funds from open market.

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