Exhibit 4.1 The balance sheet and income statement shown below are for Koski Inc
ID: 2809234 • Letter: E
Question
Exhibit 4.1
The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.
2016
$2,145
8,970
12,480
$23,595
$15,405
$39,000
$7,410
4,290
5,460
$17,160
$7,800
$24,960
$5,460
8,580
$14,040
$39,000
$58,500
54,698
1,024
$2,779
829
$1,950
683
$1,268
500.00
$443.63
6.25%
35%
$30.42
Refer to Exhibit 4.1. What is the firm's TIE? Do not round your intermediate calculations.
Question 9 options:
3.99
3.19
3.76
3.35
3.82
Balance Sheet (Millions of $) Assets2016
Cash and securities$2,145
Accounts receivable8,970
Inventories12,480
Total current assets$23,595
Net plant and equipment$15,405
Total assets$39,000
Liabilities and Equity Accounts payable$7,410
Accruals4,290
Notes payable5,460
Total current liabilities$17,160
Long-term bonds$7,800
Total liabilities$24,960
Common stock$5,460
Retained earnings8,580
Total common equity$14,040
Total liabilities and equity$39,000
Income Statement (Millions of $) 2016 Net sales$58,500
Operating costs except depreciation54,698
Depreciation1,024
Earnings before interest and taxes (EBIT)$2,779
Less interest829
Earnings before taxes (EBT)$1,950
Taxes683
Net income$1,268
Other data: Shares outstanding (millions)500.00
Common dividends (millions of $)$443.63
Int rate on notes payable & L-T bonds6.25%
Federal plus state income tax rate35%
Year-end stock price$30.42
Explanation / Answer
Times interest ratio = EBIT / interest
Times interest ratio = 2,779 / 829
Times interest ratio = 3.35
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