Question

When a firm has both interest expenses and lease payments, its times interest earned ratio Select one A. Will be smaller than its fixed charge coverage B. Will be greater than its fixed charge coverage cWill be equal to its fixed charge coverage D. Wis not be able to be determined Southpark Ind bad income before interest and taxes of $30,000, paid $4.000 in interest expense, and had $5,000 in operating lease expenses. What is the firm's fixed charge coverage Select one Bax C 3.6x 0.5%

Answer 1

of B greater than its will be Coreer fined charge coverage". Tines Interest earned Income before I neust & kene Interest expense Fired coverage Charge licone before Interest & that paymenk Interest expense t lease payment from above forumae we can Conclude that Times interest earned will be greater than fired Charge coverage. . Correct C arwee is 36% n fixed Charge Coverage a 20000 t foto 6000t yooo 3.6 X -> Corner answer is B It inventory is a large portion of current assel." Quick anets does not include inventory, however Cusent assets includes inventory Therefore if inventory then Current ratio will be higher than Quick rahb. is high