The Galaxy Enterprises has $800,000 of debt outstanding, and it pays an interest rate of 6% annually. Galaxy's annual sales are $3 million, its average tax rate is 25%, and its net profit margin on sales is 4%. If the company does not maintain a TIE ratio of at least 6 to 1, its bank will refuse to renew the loan and bankruptcy will result. What is Galaxy's TIE ratio?

The Galaxy Enterprises has $800,000 of debt outstanding, and it pays an interest rate of 6% annually. Galaxy's annual sales are $3 million, its average tax rate is 25%, and its net profit margin on sales is 4%. If the company does not maintain a TIE ratio of at least 6 to 1, its bank will refuse to renew the loan and bankruptcy will result. What is Galaxy's TIE ratio?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter7: Analysis Of Financial Statements

Section: Chapter Questions

Problem 10P: The Morrit Corporation has $600,000 of debt outstanding, and it pays an interest rate of 8%...

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