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Times Interest Earned

A company has sales of $1 million, tax rate of 40%, net profit margin of 6% and total interest charges of $10,000 per year. What is the TIE ratio?

I am unable to figure this out using the formula.

Solution Preview

The TIE formula is EBIT/Interest ( EBIT - Earnings before Interest and Taxes)

Net profit margin = 6% = ...

Solution Summary

The solution explains the calculation of times interest earned ratio

$2.19