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Times-Interest-Earned Ratio The Morris Corporation has $950,000 of debt outstanding, and it pays an interest rate...

Times-Interest-Earned Ratio

The Morris Corporation has $950,000 of debt outstanding, and it pays an interest rate of 9% annually. Morris's annual sales are $4.75 million, its average tax rate is 40%, and its net profit margin on sales is 8%. If the company does not maintain a TIE ratio of at least 3 to 1, its bank will refuse to renew the loan and bankruptcy will result. What is Morris's TIE ratio? Do not round intermediate calculations. Round your answer to two decimal places.

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Answer #1

Solution:-

To Calculate TIE Ratio-

TIE Ratio =

TIE Ratio =

TIE Ratio = 8.41

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