Problem 1
A firm has net income before interest and taxes of $135,000 and interest expense of $27,500.
(a) What is the times-interest-earned ratio?
Times-interest earned
(b) If the firm's lease payments are $43,700, what is the fixed charge coverage?
Fixed charge coverage
Problem 2
Quantum Moving Company has the following data. Industry information also is shown.
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Company data
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Industry data on
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Year
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Net income
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Total assets
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Net income/Total assets
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2008
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$
|
447,000
|
|
$
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2,899,000
|
|
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13.5
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%
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|
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2009
|
|
429,000
|
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$
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3,262,000
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|
|
9.2
|
|
|
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2010
|
|
442,000
|
|
$
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3,826,000
|
|
|
7.0
|
|
|
|
|
Year
|
Debt
|
Total assets
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Industry data on
debt/Total assets
|
|
2008
|
$
|
1,639,000
|
|
$
|
2,899,000
|
|
|
54.2
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%
|
|
|
2009
|
|
1,748,000
|
|
$
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3,262,000
|
|
|
44.8
|
|
|
|
2010
|
|
1,943,000
|
|
$
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3,826,000
|
|
|
33.0
|
|
|
|
(a) Calculate the company's data in terms of (Round your answers to 1 decimal place. Omit the "%" sign in your response):
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2008
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2009
|
2010
|
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Net income / Total assets
|
|
|
|
|
Debt / Total assets
|
|
|
|
| |
(b) As an industry analyst comparing the firm to the industry, are you likely to praise or criticize the firm in terms of:
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Praise/Criticize
|
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Net income / Total assets
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Debt / Total assets
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