Wolken Corporation has $500,000 of debt outstanding, and it pays an interest rate of 10 percent annually.

Question:

Wolken has $500,000 of debt outstanding, and it pays an interest rate of 10 percent annually. Wolken’s annual sales are $2 million; its average tax rate is 20 percent; and its net profit margin is 5 percent. If the company does not maintain a TIE ratio of at least 5.0 times, its bank will refuse to renew the loan and bankruptcy will result. What is Wolken’s TIE ratio?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...