16 Last year, Crystal Rock Holdings reported $510,000 of sales, $262,500 of operating costs other thandepreciation, and $10,200 of depreciation. The company had $600,000 of bonds outstanding that carry a7.0% interest rate, and its income tax rate was 40%. What was the firm's times-interest-earned (TIE) ratio?Your answer should be between 4.20 and 7.12, rounded to 2 decimal places, with no special characters.

Answered: Last year, Crystal Rock Holdings…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter5: The Income Statement And The Statement Of Cash Flows

Section: Chapter Questions

Problem 1RE: Brandt Corporation had sales revenue of 500,000 for the current year. For the year, its cost of...

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Last year, Crystal Rock Holdings reported $510,000 of sales, $262,500 of operating costs other than
depreciation, and $10,200 of depreciation. The company had $600,000 of bonds outstanding that carry a
7.0% interest rate, and its income tax rate was 40%. What was the firm's times-interest-earned (TIE) ratio?
Your answer should be between 4.20 and 7.12, rounded to 2 decimal places, with no special characters.

Expert Solution

Introduction

The times-interest-earned ratio is a financial ratio that represents the ability of a company to meet its cost of debt using the operating income. The cost of debt for a company is the interest expense payable on its outstanding debt obligation. Operating income refers to the income after adjustment of direct and indirect expenses along with the adjustment for non-cash expenses such as depreciation from the total revenue.

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