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    Times interest earned ratio, compute net income from ratios,

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    McMaster Inc, has a times interest earned ratio of 4.0. Based on this ratio, a creditor knows that McMasters EBIT must decline by more than____ before McMaster will be unable to cover its interest expense.
    A 33%
    B 40%
    C 67%
    D 75%
    E 80%

    A firm has sales of $500, total assets of $300 and a debt-equity ratio of 2. If its return on equity is 15%, what is its net income?
    A $ 7.50
    B $15.00
    C $22.00
    D $32.50
    E $50.00

    A firm sells 45, 000 units a year. It has an EOQ of 1,800 units. The firm offers it customers credit terms of 2/10, net 30. The firm uses a 360-day year. If both the firm and the customers operate in a manner that maximizes the benefits to themselves, the firm will have an operating cycle equal to __days.
    A 24.4
    B 25.0
    C 35.0
    D 35.6
    E 44.4

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    https://brainmass.com/business/finance/times-interest-earned-ratio-compute-net-income-from-ratios-220327

    Solution Preview

    McMaster Inc., has a times interest earned ratio of 4.0. Based on this ratio, a creditor knows that McMasters EBIT must decline by more than____ before McMaster will be unable to cover its interest expense.
    A 33%
    B 40%
    C 67%
    D 75%
    E 80%
    Answer: D
    We will assume that the EBIT is equal to $100 and Interest expense is equal to $25.
    Times interest earned = Earnings before interest and tax
    Interest ...

    Solution Summary

    This solution is comprised of a detailed explanation to calculate times interest earned ratio, compute net income from ratios, and operating cycle days.

    $2.19

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