Question

Balance Sheet (Millions)			Income Statement (Millions)
Assets
Cash	1,290		Net Sales	51,600
Receivables	9,890		Operating Costs	48,246
Inventory	13,760		Depreciation	903
PP&E	18,060		EBIT	2,451
Total Assets	43,000		Interest	927
			EBT	1,524
Liabilities and OE			Taxes	534
Accounts Payable	8,170		Net Income	990
Notes Payable	6,677
Wages Payable	4,073		Other Data
Long Term Bonds	8,815		Shares Outstanding (millions)	750
Total Equity	15,265		Dividends (millions)	$346.67
Calculate the TIE ratio. Show work for credit.

Answer 1

TIE ratio stands for Times Interest Earned ratio. This ratio tells how many times the interest expense the firm is able to generate its earnings before interest and taxes (EBIT). The more the ratio, the more the efficiency because firm can easily meet out its interest expense obligation for the reporting period concerned. By formula, TIE ratio = EBIT / Interest Expense Earnings Before Interest and Taxes (EBIT) Interest Expense Time Interest Earned (TIE) ratio $2,451 $927 2.64 ($2451 / $927]