85.LombardiTruckingCompanyhasthefollowingdata: Assets: $10,000 Profitmargin: 3.0% Debtratio: 60.0% Interestrate: 10.0% Taxrate: 40% Totalassetturnover: 2.0 WhatisLombardi'sTIEratio? a. 0.95 b. 1.75 c. 2.10 d. 2.67 e.3.45 d ANSWER: TATurnover= S/A=2 S/$10,000=2S=$20,000 RATIONALE: Debt= $6,000INT= $6,000(0.1)=$600 NI=$600 EBIT $1,600 Int. 600 EBT $1,000 Taxes(40%) 400 NI $600 TIE= $1,600/$600=2.67 Tough DIFFICULTY: TIEratio TOPICS:
85.LombardiTruckingCompanyhasthefollowingdata: Assets: $10,000 Profitmargin: 3.0% Debtratio: 60.0% Interestrate: 10.0% Taxrate: 40% Totalassetturnover: 2.0 WhatisLombardi'sTIEratio? a. 0.95 b. 1.75 c. 2.10 d. 2.67 e.3.45 ANSWER: d RATIONALE: TATurnover= S/A=2 S/$10,000=2S=$20,000 Debt= $6,000INT= $6,000(0.1)=$600 NI=$600 EBIT $1,600 Int. 600 EBT $1,000 Taxes(40%) 400 NI $600 TIE= $1,600/$600=2.67 DIFFICULTY: Tough TOPICS: TIEratio
Test-Bank-CFIN-4-4th-Edition-Besley.docx