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    Long term debt and fixed charge coverage

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    Jones Petro Company reports the following consolidated statement of income:
    Operating revenues $2,989
    Costs and expenses:
    Cost of rentals and royalties 543
    Cost of sales 314
    Selling, service, administrative, and general exp 1,424
    Total costs and expenses 2,281
    Operating income 708
    Other income 27
    Other deductions (interest) 60
    Income before income taxes 675
    Income taxes 309
    Income before outside shareholders' interest 366
    Outside shareholders' interests 66
    Net income $300

    Note: Depreciation expense totals $200; operating lease payments total $150; and preferred dividends total $50.
    Assume that 1/3 of operating lease payments is for interest.
    Required
    a. Compute the times interest earned.
    b. Compute the fixed charge coverage.

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    https://brainmass.com/business/leasing/long-term-debt-fixed-charge-coverage-337711

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    ANSWERS

    a. Compute the times interest earned.
    TIE = (Net income + ...

    Solution Summary

    Long term debt and fixed charge coverage is examined. The times interest earned is examined.

    $2.49

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