Using the income statement for Times Mirror and Glass Co., compute the following ratios: TIMES MIRROR AND GLASS COMPANY
Sales $ 266,000
Cost of goods sold 161,000
Gross profit $ 105,000
Selling and administrative expense 46,400
Lease expense 13,300
Operating profit* $ 45,300
Interest expense 7,300
Earnings before taxes $ 38,000
Taxes (30%) 15,200
Earnings after taxes $ 22,800
*Equals income before interest and taxes.
a. Compute the interest coverage ratio. (Round your answer to 2 decimal places.)
b. Compute the fixed charge coverage ratio. (Round your answer to 2 decimal places.)
The total assets for this company equal $172,000. Set up the equation for the Du Pont system of ratio analysis.
c. Compute the profit margin ratio. (Input your answer as a percent rounded to 2 decimal places.)
d. Compute the total asset turnover ratio. (Round your answer to 2 decimal places.)
e. Compute the return on assets (investment). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

(A) Interest coverage charge ratio= 6.21

(B) Fixed charge coverage = 2.84

(C) Profit margin ratio= 8.57%

(D) Total assets turnover= 1.55

(E) Return on assets= 13.26%

Explanation:

(A) The Interest coverage charge ratio can be calculated as follows= EBIT/Interest expense

= 45,300/7,300

= 6.21

(B) The fixed charge coverage can be calculated as follows

= income before fixed charge + interest/fixed charges + interest

= 45,300+13,300/7,300+13,300

= 58,600/20,600

= 2.84

(C) The profit margin ratio can be calculated as follows

= Net income/sales × 100

= 22,800/266,000 × 100

=0.0857 × 100

= 8.57%

(D) The total assets turnover can be calculated as follows

= Sales/total assets

= 266,000/172,000

= 1.55

(E) The return on assets can be calculated as follows

= Net income/Total assets × 100

= 22,800/172,000 × 100

= 0.13255×100

= 13.26%

income statement is prepared in order to show the profits and loss of a business. in order to prepare the income statement she should collect all the income and expenses of the product with the cost of production.

answer; tech (a) is correct;