Ask Question
11 February, 13:20

Chutes & Co. has interest expense of $ 1.25 million and an operating margin of 10.8 % on total sales of $ 30.7 million. What is Chutes' interest coverage ratio?

+2
Answers (1)
  1. 11 February, 13:29
    0
    2.7 times

    Explanation:

    Chutes and co. has an interest expense of 1.25 million

    Operating margin of 10.8%

    Total sales of 30.7 million

    The first step is to calculate the operating income

    Operating income = Sales*operating margin

    = $30,700,000*10.8/100

    = $30,700,000*0.108

    = $3,315,600

    Therefore, the interest coverage ratio can be calculated as follows

    Interest coverage ratio = Operating income/Interest expense

    = $3,315,600/$1,250,000

    = 2.65

    = 2.7 times

    Hence Chutes' interest coverage ratio is 2.7 times
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Chutes & Co. has interest expense of $ 1.25 million and an operating margin of 10.8 % on total sales of $ 30.7 million. What is Chutes' ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers