This year, Fero Inc. generated sales of $10 million. Its fixed operating cost is $1 million...

 

Transcribed Image Text:

This year, Fero Inc. generated sales of $10 million. Its fixed operating cost is $1 million and its variable cost ratio is 30 percent of sales. Ferro has $60 million of debt outstanding with a before-tax cost of 12 percent. Which of the following statements about Ferro's times interest earned (TIE) ratio is сorect? Ferro's TIE ratio is 1.20, which suggests it has enough earnings to meet the required interest payments. Ferro's TIE ratio is 0.83, which suggests it does not have enough earnings to meet the required interest payments. Ferro's TIE ratio is 0.83, which suggests it has enough earnings to mcet the required interest payments. Ferro's TIE ratio is 1.39, which suggests it does not have enough cknings to meet the required interest payments. Ferro's TIE ratio is 1.00, which suggests it has just enough earnings to meet the required interest payments. This year, Fero Inc. generated sales of $10 million. Its fixed operating cost is $1 million and its variable cost ratio is 30 percent of sales. Ferro has $60 million of debt outstanding with a before-tax cost of 12 percent. Which of the following statements about Ferro's times interest earned (TIE) ratio is сorect? Ferro's TIE ratio is 1.20, which suggests it has enough earnings to meet the required interest payments. Ferro's TIE ratio is 0.83, which suggests it does not have enough earnings to meet the required interest payments. Ferro's TIE ratio is 0.83, which suggests it has enough earnings to mcet the required interest payments. Ferro's TIE ratio is 1.39, which suggests it does not have enough cknings to meet the required interest payments. Ferro's TIE ratio is 1.00, which suggests it has just enough earnings to meet the required interest payments.

Answer rating: 100% (QA)

TIE EBITinterest expense Variable costs 03 10 m 3 m Total operat... View the full answer