Question

Supposing you are working with a Local Bank as Loan Manager. Your Bank's Policy is to not give any loan if the TIMES INTEREST EARNED( TIE) Ratio is less than 3.00. A small Business wants to borrow $100,000. His Income Statement for the year ending is given below:

1. Net Sales = $ 2.75 m: 2. COGS = $ 1.50 m : 3. Operating Expenses = $ 0.75 m:

4. Interest Payments = $ 0.2 m.

According your calculation. the calculated Value of TIE RATIO is =

	a.	3.50 > 3.00, Approve the Loan Application
	b.	3.76 > 3.00, Approve the Loan Application
	c.	2.50 < 3.00 Reject the Loan Application
	d.	Approve the Loan anyway, because as a Loan Manager you will earn 1% of Loan amount in Commission.
	e.	1. 82 < 3.00 Reject the Loan Application

Answer 1