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1017tweety · Sep 10, 2009, 03:26 PM

Total assets were 460,000 its operating cost were 362,500 and it interest charges were 12,500 what was the firm's- interest-earned (TIE)ratio?

ArcSine · Sep 10, 2009, 04:02 PM

Not enough info provided. TIE is

$\frac{\text{EBIT}}{\text{Interest Expense}}$

where EBIT is Net Income Before Interest Expense and Taxes.

rehmanvohra · Sep 12, 2009, 12:06 AM

Originally Posted by 1017tweety

total assets were 460,000 its operating cost were 362,500 and it interest charges were 12,500 what was the firm's- interest-earned (TIE)ratio?

I think tweety made a mistake in the opening line. It should be total sales and not assets. If this is the case, then the formula given by Arcsine can be applied.

ArcSine · Sep 12, 2009, 05:31 AM

Originally Posted by rehmanvohra

I think tweety made a mistake in the opening line. It should be total sales and not assets.

That certainly looks like a reasonable possibility. When I originally opened with "not enough info" I was thinking maybe something like "asset turnover" had been omitted--given the asset turnoover ratio, along with total assets, the sales could be derived.

But a simple erroneous replacement of "assets" for "sales" by Tweety seems like a good possibility as well. In any event, Tweety, check your question and post back.