Answer: c. Arrange for the alliance to be managed at the corporate level.
Explanation:
To mitigate the risk of the various units of American Snacks partnering with Très Bien competitors, the alliance should be managed at Corporate level. All the different units are subservient at Corporate level therefore managing the alliance from there would mean that the different units cannot partner with rivals because Corporate level decisions are strategic and affect the entire company.
Partnering with rivals would therefore be unfeasible across the entire company.
Prove shylock is stubborn
Which of the following statements about executing and evaluating the promotion program is most accurate?
a. Although there are five elements in the promotional mix, the only element that reallybenefits from an IMC audit is advertising.
b. Most IMC programs have no difficulty creating a pretest, but posttests are much moredifficult to construct since a number of unknown elements must be measured.
c. To fully benefit from IMC programs, companies must create and maintain a test-resultdatabase that allows comparisons of the relative impact of the promotional tools and theirexecution options in varying situations.
d. The ideal IMC program does not need any evaluation if it is executed according to plan.E. The most effective IMC audits are external. Internal audits tend to skew results to fitexpectations.
Answer: To fully benefit from IMC programs, companies must create and maintain a test-resultdatabase that allows comparisons of the relative impact of the promotional tools and their execution options in varying situations.
Explanation:
Out of the statements about executing and evaluating the promotion program that were given in the question, the option that is most accurate is that to fully benefit from IMC programs, companies must create and maintain a test-result database that allows comparisons of the relative impact of the promotional tools and their execution options in varying situations.
Therefore, option C is the correct answer.
A producer can produce a product at a variable cost per unit of $7. The producer can sell the product for $10 each. If the fixed cost is $60,000.
Required:
a. How many units must the producer sell to break-even?
b. What is revenue at 35,000 units?
c. What is total cost at 35,000 units?
d. How many units must the producer sell in order to earn a profit of $60,000?
Answer:
a.
Break even in units = 20000 units
b.
Revenue at 35000 units = $350000
c.
Total cost (35000 units) = $305000
d.
Units required for target profit = 40000 units
Explanation:
a.
The break even in units is the number of units that must be sold in order to earn enough total revenue as to cover total costs. The break even in units can be calculated as follows,
Break even in units = Fixed cost / Contribution margin per unit
Where,
Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = 10 - 7 =$3
Break even in units = 60000 / 3
Break even in units = 20000 units
b.
Revenue = Price * Quantity
Revenue at 35000 units = 10 * 35000
Revenue at 35000 units = $350000
c.
Total cost = Variable cost + Fixed cost
Total cost (35000 units) = 7 * 35000 + 60000
Total cost (35000 units) = $305000
d.
To calculate the units required to earn a target profit, we simply add the target profit amount to the fixed costs in the break even in units equation.
Thus, the number of units required to earn a target profit of $60000 is,
Units required for target profit = (60000 + 60000) / 3
Units required for target profit = 40000 units
The per-unit standards for direct materials are 2 gallons at $4 per gallon. Last month, 11200 gallons of direct materials that actually cost $42400 were used to produce 6000 units of product. The direct materials quantity variance for last month was
Answer:
$3,200 Favorable
Explanation:
For the computation of direct materials quantity variance first we need to find out the standard quantity which is shown below:-
Standard quantity = Standard quantity per unit × Number of units produced
= 2 gallon × 6,000
= 12,000
Direct materials quantity variance = (Standard quantity - Actual quantity) × Standard Price
= (12,000 - 11,200) × $4
= 800 × $4
= $3,200 Favorable
EHealth Corporation has $1,000 par value bonds with 4 years to maturity. The bonds pay an 8% coupon rate with semi-annual coupon interest payments. The bond's closing price is quoted at 103.75. Suppose you purchase the bond for the closing price. What is the bond's yield to maturity?
Answer:
Yield to Maturity(YTM) = 3.47%
Explanation:
The yield to maturity is the required rate of return (discount rate) that would equate the price of the bond and cash outflow expected from the bond. The yield on the bond can be determined as follows using the formula below:
YTM = C + F-P/n) ÷ 1/2 (F+P)
YTM-Yield to maturity-
C- coupon
F- Face Value
P- Current Price
DATA
Coupon = coupon rate × Nominal value = 1,000 × 8%× 1/2=40(note we divide by 2 because interest is paid semi-annually)
n= 4×2 = 8 (note there 2 half months in a year)
Face Value = 1000
YM-?, C-40, Face Value - 1,000, P-103.75/100× 1000 = 1037.5
YM = (40 + (1000-1037)/8) ÷ ( 1/2× (1000 + 1037.5 ) ) =0.0347
YM = 0.0347 × 100 = 3.47%
Yield to Maturity = 3.47%
Michigan Corporation manufactured inventory in the United States and sold the inventory to customers in Canada. Gross profit from sale of the inventory was $500,000. Title to the inventory passed FOB: Destination. How much of the gross profit is treated as foreign source income for purposes of computing Michigan Corporation’s foreign tax credit in the current year?
Answer:
50% of gross profit = $250,000
Explanation:
The Tax Cuts and Jobs Act of 2017 changed some aspects of Section 863(b), but aspects regarding US companies producing locally and exporting their production to foreign countries remains the same. US companies can allocate 50% of gross profit as foreign source income, while the other 50% must be allocated as domestic income due to production related activities.
According to empirical studies, greater consumption is likely to lead to unhappiness. This condition is called _____.
Answer:
Affluenza.
Explanation:
It is a term that described to be psychological and socio-metaphorical illness seen amongst children or also in teens who grow up in a privileged lifestyle, largely isolated emotionally and developmentally from their working parents etc. In most cases according to research, it is seen to make such children feel more isolated than their friends, while at the same time feeling an increase in pressure to perform.
The effect of this affluenza is also seen to make such people to have a feeling of giving themselves excessive pressure to achieving things, these includes in both academic and extracurricular activities.
Interest rates can be measured more accurately and quickly than reserve aggregates; hence an interest rate is preferred to the reserve aggregates as a policy instrument.
a. True
b. False
Answer:
False
Explanation:
This is false.
In reporting reserves aggregate there are lags interest rate such as the federal interest rate are quite easy to measure and easily observable. Such short term interest rate are nominal values and they do not measure the real cost of borrowing well. It does not show accurately what happens to Gross domestic product. Real interest rate equals nominal interest rate as a ratio of reduced inflation gives a representation of true cost of borrowing.
We cannot say with certainty that interests rate is a better policy instrument based on the ground of measurability.
A stock has an expected return of 13.5 percent, its beta is 1.40, and the expected return on the market is 11.5 percent. What must the risk-free rate be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
The risk free rate is 6.50%
Explanation:
The required rate of return is the minimum return that investors demand/expect on a stock based on the systematic risk of the stock as given by the beta. The expected or required rate of return on a stock can be calculated using the CAPM equation.
The equation is,
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free rate rM is the return on market
As we know the figures for r, Beta and rM, we will input these figures in the equation to calculate risk free rate.
Let risk free rate be x.
0.135 = x + 1.4 * (0.115 - x)
0.135 = x + 0.161 - 1.4x
0.135 - 0.161 = x - 1.4x
-0.026 = -0.4x
-0.026 / -0.4 = x
x = 0.065 or 6.50%
r = 0.1475 or 14.75%
On January 22, Jefferson County Rocks Inc., a marble contractor, issued for cash 180,000 shares of $20 par common stock at $23, and on February 27, it issued for cash 25,000 shares of preferred stock, $7 par at $9.
A. Journalize the entries for January 22 and February 27.
Jan. 22 Cash
Common Stock
Paid-In Capital in Excess of Par-Common Stock
Feb. 27 Cash
Preferred Stock
Paid-In Capital in Excess of Par-Preferred
B. What is the total amount invested (total paid-in capital) by all stockholders as of February 27?
Answer:
A. Journalize the entries for January 22 and February 27.
January 22, 202x, common stocks issued:
Dr Cash 4,140,000
Cr Common stock 3,600,000
Cr Additional paid in capital: common stock 540,000
February 27, 202x, preferred stocks issued:
Dr Cash 225,000
Cr Preferred stock 175,000
Cr Additional paid in capital: preferred stock 50,000
B. What is the total amount invested (total paid-in capital) by all stockholders as of February 27?
$4,140,000 + $225,000 = $4,365,000
balance sheet reports assets of $6900000 and liabilities of $2700000. All of Ivanhoe’s assets’ book values approximate their fair value, except for land, which has a fair value that is $410000 greater than its book value. On 12/31/21, Oriole Corporation paid $7030000 to acquire Ivanhoe. What amount of goodwill should Oriole record as a result of this purchase?
Answer: $2,420,000
Explanation:
Goodwill is the amount over the fair value of a company that it is purchased for.
Goodwill = Acquisition price - Net Assets
Net Assets = Assets - Liabilities
= (6,900,000 + 410,000) - 2,700,000
= $4,610,000
Goodwill = 7,030,000 - 4,610,000
= $2,420,000
Under Armour uses its website to sell its products, but Nathan Shriver, art director of Interactive, believes that what the website does, and what advertising does not do, is make the brand
Answer:
This question is incomplete, the options are missing. The options are the following:
a) Friendlier to the customer
b) Recognizable in retail stores
c) Seem special compare to off-label gear
d) Part of the consumer's daily life
e) Seem of higher quality than Nike
And the correct answer is the option D: Part of the consumer's daily life.
Explanation:
To begin with, when Nathan Shriver says that he believes that the website and advertising of the company does is to make the brand more part of the consumer's daily life refers that in the end it is that action what truly makes the company to increase its sales due to the fact that thanks to the marketing campaigns now the brand is more important in the life of the consumers and more due to the fact that those advertising make them understand that the use of Under Armour's products is essential to every day training and movement that the clients might face.
Lead Was Once Used in Makeup
Answer:
I DIDN'T UNDERSTAND IS IT FUN FACT OR A YOU'RE TRYING TO ASKQUESTION ?"A registered representative ("RR") manages a corporate account. The corporation recently elected a new CEO who contacts the "RR" and gives trade instructions. Which statement is TRUE? The trade should be:"
Answer: D. entered once the "RR" verifies that the CEO is an authorized trader in the account
Explanation:
The registered representative must only trade on a corporate account on orders given by a person that is authorised to do so to avoid any mismanagement.
The people authorized to do so will be listed in a Corporate Resolution issued by the Board of Directors of the company or relevant stakeholders.
The registered representative would need to check this resolution first and if they find the new CEO listed in it as authorized to make trades, the registered representative will then enter the trade.
Apply the integration-responsiveness framework to describe which global strategy Hollywood studios followed originally, and how their strategic positioning has changed over time. Explain how and why.
Answer is given below :
Explanation:
Global integration refers to the coordination of the organization’s value chain operations within countries, achieving efficiency, synergy and cross-fertilization between countries so that equality between countries is maximized. Between global integration and local accountability, the integration-accountability framework is called to help managers develop a deeper understanding of the business. We can say at the outset or at the outset that an export strategy that applies to Hollywood is used when a company focuses primarily on its domestic operations. It is not intended to expand globally, but to export certain products to take advantage of international opportunities. It does not seek to adapt its products to international markets. It is not interested in responding to specific situations in other countries or formulating a unified world strategy. Hollywood not only produced films and shows that catered to the needs of its native business aimed at American Western culture, but as the industry began to expand it began to adopt a multi-national strategy. Multi dimensional strategy follows products or processes for specific situations in each country. In the initial example, Lincoln should use a multi-year strategy to adapt its manufacturing methods to the conditions of each country where electric factories are built. Retailers often use multicultural strategies because they must cater to local customer tastes. Hollywood has started producing Indian films like Kung Fu Panda, Karate Kids, Oscar Winning Slumdog Millionaire.The global strategy that Hollywood studios followed at first was the international strategy.
It should be noted that the global strategy that Hollywood studios followed originally was the international strategy where identical movies were showed in foreign countries.
This has changed now as there are different movies that are filmed and in different versions. Also, it isn't in the control of the government to edit out any part.
Read related link on:
https://brainly.com/question/17104121
Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Smiley issued $6,200,000 of 9-year, 9% bonds at a market (effective) interest rate of 6%, receiving cash of $7,479,078. Interest is payable semiannually on April 1 and October 1.
a. Journalize the entry to record the issuance of bonds on April 1, Year 1. If an amount box does not require an entry, leave it blank.
b. Journalize the entry to record the first interest payment on October 1, Year 1, and amortization of bond premium for six months, using the straight-line method. (Round to the nearest dollar.) For a compound transaction, if an amount box does not require an entry, leave it blank.
c. Why was the company able to issue the bonds for $20,811,010 rather than for the face amount of $20,000,000?
Answer:
All requirements are solved below
Explanation:
Requirement A: Entry to record the issuance of a bond on April 1 year 1
DEBIT CREDIT
Entry
Cash $7,479,078
Bonds payable $6,200,000
Premium on Bonds payable $1,279,078
Requirement B: Entry to record the first interest payment on October 1 Year 1
DEBIT CREDIT
Entry
interest expense $207940
Premium on Bonds payable(w) $71,060
Cash(w) $279,000
Working
Cash = $6,200,000 x 9% x 6/12
Cash = 279000
Premium = ($1,279,078/9years ) x 6/12
Premium = $71,060
Requirement C: Why was the company able to issue the bonds for $7,479,078 rather than for the face amount of $6,200,000
Answer: The company was able to issue the bonds for $7,479,078 rather than $6,200,000 because the market rate of interest is less than the contract rate of interest.
Suppose you bought a bond with an annual coupon rate of 4.2 percent one year ago for $900. The bond sells for $950 today. a. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? b. What was your total nominal rate of return on this investment over the past year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. If the inflation rate last year was 2.5 percent, what was your total real rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answer:
a) total return = ($1,000 x 4.2%) + ($950 - $900) = $92
b) nominal rate of return = total return / total investment = $92 / $900 = 10.22%
c) we calculate the approximate real rate of return = nominal rate of return - inflation rate = 10.22% - 2.5% = 7.72%
if we want to determine the exact real rate of return:
exact real rate of return = [(1 + nominal rate) / (1 + inflation rate)] - 1 = (1.1022 /1.025) - 1 = 7.53%
Computing absorption costing gross profit
Refer to your answers to Short Exercise S21-6. Product X sells for $175 per unit. Assume no beginning inventories. Calculate the gross profit using absorption costing when Adamson:
a. Produces and sells 2,000 units.
b. Produces 2,500 units and sells 2,000 units
c. Produces 5,000 units and sells 2,000 units.
Answer:
a lot of information is missing, so I looked for a similar question that can help you understand this one:
Variable costs (including direct labor, direct materials and variable overhead) = $80 per units
Fixed overhead = $150,000
a) If Adamson produces 2,000 units, the total cost per unit = $80 + ($150,000 / 2,000) = $80 + $75 = $155
gross profit = total sales revenue - total cogs = (2,000 x $175) - (2,000 x $155) = $350,000 - $310,000 = $40,000
b) If Adamson produces 2,500 units, the total cost per unit = $80 + ($150,000 / 2,500) = $80 + $60 = $140
gross profit = total sales revenue - total cogs = (2,000 x $175) - (2,000 x $140) = $350,000 - $280,000 = $70,000
c) If Adamson produces 5,000 units, the total cost per unit = $80 + ($150,000 / 5,000) = $80 + $30 = $110
gross profit = total sales revenue - total cogs = (2,000 x $175) - (2,000 x $110) = $350,000 - $220,000 = $130,000
The accountant for Mandarin Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:
Retained earnings balance at the beginning of the year $949,000
Net income for the year 295,000
Cash dividends declared for the year 55,000
Retained earnings balance at the end of the year 1,397,000
Cash dividends payable at the beginning of the year 12,600
Cash dividends payable at the end of the year 14,900
What is the amount of cash dividends paid that should be reported in the financing section of the statement of cash flows?
a. $55,000.
b. $57,300.
c. $82,500.
d. $2,300.
e. $52,700.
Answer: e. $52,700
Explanation:
Cash Dividend to be paid = Cash dividends payable at the beginning of the year + Cash dividends declared for the year - Cash dividends payable at the end of the year
= 12,600 + 55,000 - 14,900
= $52,700
Assume the Residential Division of KappyKappy Faucets had the following results last year:
Net sales $6,360,000
Operating income 636,000
Average total assets 5,300,000
Management's target rate of return 16%
What is the division's return on investment?
Answer:
12%
Explanation:
Calculation for the division's return on investment
Using this formula
Return On Investment = Operating income /Average total assets
Let plug in the formula
Return on investment= $636,000/$5,300,000
Return on investment= 0.12*100
Return on investment=12%
Therefore the division's return on investment will be $12%
Waupaca Company establishes a $450 petty cash fund on September 9. On September 30, the fund shows $185 in cash along with
Complete Question:
Waupaca Company establishes a $450 petty cash fund on September 9. On September 30, the fund shows $185 in cash along with along with receipts for the following expenditures: transportation-in, $40; postage expenses, $120; and miscellaneous expenses, $80. The petty cashier could not account for a $25 shortage in the fund. The company uses the perpetual system in accounting for merchandise inventory. Prepare (1) the September 9 entry to establish the fund, (2) the September 30 entry to reimburse the fund, and (3) an October 1 entry to increase the fund to $600.
Answer:
Waupaca Company
Journal Entries:
September 9:
Debit Petty Cash Account $450
Credit Cash Account $450
To record the establishment of the petty cash fund.
September 30:
Debit Freight-in $40
Debit Postage Stamps $120
Debit Miscellaneous Expenses $80
Credit Petty Cash account $240
To record the expenses from petty cash fund.
Debit Shortage $25
Credit Petty Cash account $25
To record the cash shortage incurred.
October 1:
Debit Petty Cash account $415
Credit Cash Account $415
To record the increase of the petty cash fund to $600.
Explanation:
September 9: Petty Cash Fund = $450
September 9 to 30: Expenses:
Transportation-in, $40
Postage expenses, $120;
Miscellaneous expenses, $80 $240
Balance supposed to $210
Cash in hand $185
Shortage $25
b) The petty cash fund operates on the petty cash system, whereby a fund is earmarked for petty cash expenses. This fund is called the float or the petty cash imprest. At the end of a month, the incurred expenses are summed so that the petty cashier can be reimbursed with the actual expenses made to restore the float. This amount of the imprest can also be increased or reduced at any time, depending on management discretion.
Trendy Coats is looking at financials to prepare end of year reports. Actual hours used were 4,000. Standard hours allowed were 5,000. Actual wage paid per hour was $13. The total labor flexible budget variance was ($23,000) Favorable. What was Trendy Coat’s standard price? Select one: a. $15.00 b. $12.00 c. $17.00 d. $13.50
Answer
a) $15
Explanation:
We will use the formula for Total labor variance to arrive at Standard rate.
Total labor variance = (Actual hours × Actual rate) - (Standard hours × Standard rate)
Substituting the data above into the formula, we'll have;
-$23,000 = (4,000 × $13) - (5,000 × SR)
-$23,000 = $52,000 - 5,000SR
Collect like terms
5,000SR = $52,000 + $23,000
5,000SR = $75,000
SR = $75,000 / 5,000
SR = $15
How can you assist the ProServices team in serving Pro customers in your
department? Select all that apply.
A. Pull orders for Pro customers in advance and have them ready to pick-up
B. Call Pro customers to maintain relationships and proactively seek out business
C. Monitor inventory levels to make sure key Pro items are in-stock
D. Price match other retailers to give Pro the best price
E. Identify pro customers and introduce them to the ProServices team
Answer:
ProServices Team and Pro CustomersAssisting the ProServices Team in serving Pro customers in my department. Here I have assumed that my department manages and coordinates the relationship with Pro customers:
A. Pull orders for Pro customers in advance and have them ready to pick-up
B. Call Pro customers to maintain relationships and proactively seek out business
C. Monitor inventory levels to make sure key Pro items are in-stock
D. Price match other retailers to give Pro the best price
E. Identify pro customers and introduce them to the ProServices team.
Explanation:
“Pro” customers are a group of independent contractors, repair remodelers, specialty tradesmen, property management, and facility maintenance professionals who are afflicted to an organization offering ProServices. They are not the end customers. Between my organization and the customers, they are middlemen and women who are organized by my ProServices organization to offer specialty services to the general public in a professional manner that guarantees customer satisfaction and payment to the professionals for services rendered. In doing this, the ProService organization charges the Pro customers a fixed fee, which is deducted from the payments made by the end-customers.
The Doha Round of negotiations focuses on industrial and nontariff barriers, agriculture, services, and easing trade rules.
a. True
b. False
Answer:
True.
Explanation:
The Doha Round of negotiations focuses on industrial and non-tariff barriers, agriculture, services, and easing trade rules. It is a trade negotiation which is common among the world trade organizations (WTO) member countries. The main purpose of the Doha Round of negotiations is to enhance the international trading process through the application of revised trade rules and lower trade barriers.
This trade-negotiation round of the World Trade Organization was officially launched in November, 2001 in Doha, Qatar.
Bramble Corp. receives $360,000 when it issues a $360,000, 8%, mortgage note payable to finance the construction of a building at December 31, 2020. The terms provide for annual installment payments of $60,000 on December 31. Prepare the journal entries to record the mortgage loan and the first two payments.
Answer:
The First Payment occurs on 31 December 2021 as :
Mortgage Payable $31,200 (debit)
Interest Expense $28,800 (debit)
Cash $60,000 (credit)
The Second Payment occurs on 31 December 2022 as :
Mortgage Payable $33,696 (debit)
Interest Expense $26,304 (debit)
Cash $60,000 (credit)
Explanation:
First prepare an amortization schedule using the following data concerning the mortgage note :
Hint : Determine the number of years, N of this bond.
PV = $360,000
PMT = - $60,000
P/Yr = 1
r = 8 %
FV = 0
N = ?
The length of the bond, N is 8.4969 or 9 years
The First Payment occurs on 31 December 2021 as :
Mortgage Payable $31,200 (debit)
Interest Expense $28,800 (debit)
Cash $60,000 (credit)
The Second Payment occurs on 31 December 2022 as :
Mortgage Payable $33,696 (debit)
Interest Expense $26,304 (debit)
Cash $60,000 (credit)
Jesse Livermore, Human Resources Director of GA Trading Company recently read a report on "The state of the Baby Boomer generation between the years 2011-2030," that he believes to be factually correct. To respond to this growing trend, he has created an employee program that hopes to attract and retain _____ workers through flexible schedules, training opportunities, and creative pay schedules.
Answer: younger
Explanation:
From the question, we are informed that Jesse Livermore, Human Resources Director of GA Trading Company recently read a report on "The state of the Baby Boomer generation between the years 2011-2030," that he believes to be factually correct.
To respond to this growing trend, Jesse has created an employee program that hopes to attract and retain younger workers through a flexible schedule, training opportunities, and creative pay schedules.
You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is your maximum possible loss
Answer:
Unlimited
Explanation:
GIven that:
You short-sell 200 shares of Tuckerton Trading Co
now selling for $50 per share.
If a short-sell occurs on a trade, the lower the share price, the higher the profit your are liable to achieve but if short-sell occurs and the share price is higher, then the more loss you're going to accumulate.
From the question, the lowest possible share price is zero and the highest possible share price is infinity since there is no stop loss.
∴
The maximum possible loss = 200 × 50( 1 - infinity share price)
= Unlimited loss
building that has a market value of $366,000; the partnership assumes responsibility for a $133,000 note secured by a mortgage on the property. Monroe invests $108,000 in cash and equipment that has a market value of $83,000. For the partnership, the amounts recorded for Fontaine's Capital account and for Monroe's Capital account are:\
Answer:
Fontaine - $233,000Monroe - $191,000Explanation:
Fontaine invested a building that had a value of $366,000 but the partnership assumes a $133,000 note secured by a mortgage on the property. This therefore reduces Fontaine's contribution;
= 366,000 - 133,000
= $233,000
Monroe contributed both cash and equipment so that would go to Monroe's capital account as their capital contribution;
= 108,000 + 83,000
= $191,000
chỉ số giá tiêu dùng
In the past year, TVG had revenues of $3 million, cost of goods sold of $2.5 million, and depreciation expense of $200,000. The firm has a single issue of debt outstanding with book value of $1 million on which it pays an interest rate of 8%. What is the firm’s times interest earned ratio?
Answer:
TVG
Times Interest Earned Ratio (TIER) = Earnings Before Interest & Taxes divided by Interest Expense
= $300,000/$$80,000 = 3.75 times
Explanation:
a) TVG Income Statement:
Revenue $3,000,000
Cost of goods sold 2,500,000
Gross profit $500,000
Depreciation 200,000
EBIT $300,000
Interest Expense 80,000
Pre-tax Income $220,000
b) TVG's TIER shows the number of times that its earnings before interest and taxes covers the interest expense. It shows the ability of the TVG to settle its maturing debt obligations from current earnings. It is an important financial performance measure which potential investors in TVG will use to gauge the ability of TVG to meet financial obligations from the earnings it generates.