Using the income statement for Times Mirror and Glass Co., compute the following

Question

Using the income statement for Times Mirror and Glass Co., compute the following ratios TIMES MIRROR AND GLASS Co Income Statement 244,000 135,000 S 109,000 47,900 18,200 42,900 8300 $ 34,600 13,840 $ 20,760 Sales Cost of goods sold Gross profit Selling and administrative expense Lease expense Operating profit Interest expense Earnings before taxes Taxes (30%) Earnings after taxes Equals income before interest and taxes a.Compute the interest coverage ratio. (Round your answer to 2 decimal places.) Interest coverage times b.Compute the fixed charge coverage ratio. (Round your answer to 2 decimal places.) Fixed charge times The total assets for this company equal $240,000. Set up the equation for the Du Pont system of ratio analysis. c.Compute the profit margin ratio. (Input your answer as a percent rounded to 2 decimal places.) Profit margin

Explanation / Answer

a) Interest coverage ratio = EBIT / Interest expense

In this case, EBIT is same as operating profit

Interest coverage ratio = 42900 / 8300

= 5.17

b) Fixed charge coverage ratio = (EBIT + Lease expense)/(lease + interest expense)

= (42900 + 18200)/(18200 + 8300)

= 2.31

c) Profit margin ratio = Net profit / Sales

= 20760/244000

= 8.51 %

d) Total asset turnover ratio = Sales / Total assets

= 244000/240000

= 1.02

e) Return on assets = Net income / Total assets

= 20760/240000

= 0.09

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