National Corporation has P850,000 of debt outstanding, and it pays an interest rate of 10 percent annually on its bank loan. National’s annual sales are P3,200,000, its average tax rate is 40 percent, and its net profit margin on sales (Net income after tax) is 6 percent. If the company does not maintain a Times Interest Earned ratio of at least 4 times, its bank will refuse to renew its loan, and bankruptcy will result. What is National’s current Times Interest Earned ratio?

National Corporation has P850,000 of debt outstanding, and it pays an interest rate of 10 percent annually on its bank loan. National’s annual sales are P3,200,000, its average tax rate is 40 percent, and its net profit margin on sales (Net income after tax) is 6 percent. If the company does not maintain a Times Interest Earned ratio of at least 4 times, its bank will refuse to renew its loan, and bankruptcy will result. What is National’s current Times Interest Earned ratio?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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