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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.
a. Compute the times interest earned.
b. Compute the fixed charge coverage.

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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.