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A firm earned $1o,o before interest and taxes, has a 36% tax rate, and has the following debt outstanding?

A firm earned $1o,o before interest and taxes, has a36% tax rate, and has the following debt outstanding: First mortgage bond,9.0% $5,o. Debenture,10.2%1o,o. Subordinated bond,12.0%6,o. Total long-term debt $21,o. The annual coverage of the firm's debt is: A.4.57 times. B.2.92 times. C.11.85 times. D.3.57 times.

Budgeting Financial Reporting Financial Accounting Financial Analysis Financial Management
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Question added by Anayatullah Tahir , Finance Manager , Etqan Projects
Date Posted: 2014/05/06
Upvote (2) Views (7) Followers (2) Answers (2) Report Question
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Muhammad Zubair
by Muhammad Zubair , CFO / Chief Accountant , RH Group

A.4.57 times. interest payments $2.19 and total profit before taxation is $10

shaimaa selim
by shaimaa selim , Accountant , Center for Egyptian women's legal assistance (CEWLA foundation)

A is the correct answer

DCR  = EBIT/ total debt service

DCR=10/2.19=4.57 times

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