(TimesInterestEarned Ratio)The Morris Corporation has $250 000 of debt outstanding and it pays an

Question

(Times-Interest-Earned Ratio)

The Morris Corporation has $250,000 of debt outstanding, and it pays an

interest rate of 8% annually. Morris’s annual sales are $1.25 million, its average tax rate is 30%, and its net profit margin on sales is 6%. 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 Morris’s TIE ratio? Do not round intermediate calculations. Round your answer to two decimal places.

Financial Accounting