Question

Thomson Trucking has $21 billion in assets, and its tax rate is 35%. Its basic earning power (BEP) ratio is 17%, and its return on assets (ROA) is 3%. What is its times-interest-earned (TIE) ratio? Round your answer to two decimal places.

Answer 1

Please provide rating.. Let me know if you need any clarification ..

Given that-
BEP =		17%
Which mean
EBIT/Total asset =		17%
Also Total asset =		21	Billion
Therefore EBIT = 21billion *17%		3.57	Billion
ROA is 3%
ROA = Net income/Total asset
Net income = Total asset *3%	=21Billion*3%	0.63	billion
Earning before tax = Net income/(1-Tax) = 1/(1-35%)		0.97	billion
Interest expenses =EBIT-EBT =	=3.57-.97	2.60	billion
Times interest earned ratio = EBIT / Interest expense	=3.57/2.6	1.37	times