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# Question about Times interest earned ratio

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Manor Corp. has \$ 500,000 of debt outstanding and it pays an interest rate of 10% annually. Manor's annual sales are \$2 million, and its average tax rate is 30% and its net profit margin is 5%. If the company does not maintain a TIE ratio of at least 5 times, its bank will not renewal the loan, and bankruptcy will result. What is Manor's TIE ratio?

#### Solution Summary

Times interest earned ratio for Manor Corp. are examined. Manor Corp.'s outstanding debt is \$500,000.

\$2.19
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Firm A Firm B
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Equity 300,000 100,000

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