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What is EBIT here? Also, calculate Times interest earned for 1993 with the data provided. 1993 ...

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What is EBIT here? Also, calculate Times interest earned for 1993 with the data provided. 1993

Cash 136

Accounts receivable, net 2,447

Inventory 2,916

Current Assets 5,499

Land 567

Buildings, fixtures, and equipment 2,167

Less: Reserve for depreciation 304

Net buildings, fixtures, and equipment 1,863

Investments 104

Due from stockholders ?

Deferred charges 64

Total assets 8,097

Accounts payable 1,382

Notes payable, employees 112

Estimated federal income tax 104

Current maturities on long-term debts 248

Miscellaneous accruals 586

Current liabilities 2,432

Notes payable, bank 871

Mortgage loan 3,611

Capital stock 879

Earned surplus (deficit) 304

Total liabilities and net worth 8,097

Net worth 1,183

Exhibit 4 Income Statements for FYE 1/31 (thousands of DM) 1993

Sales 18,647

Less: Returns and allowances 1,678

Net sales 16,969

Cost of goods sold 10,322

Gross profit 6,647

Less: Operating expenses 5,704

Operating profit 943

Other income 639

Net after other income 1,582

Other deductions 383

Net profit (loss) before tax 1,199

Dividends paid 336

EBIT:

EBIT stands for earnings before interest and tax. EBIT is one of the important figures to measure operating performance during a specific period. A high EBIT will be favorable for any business.

Answer and Explanation:

EBIT = Net after other income = 1,582

Assume that all other deductions are the interest expenses. The Times interest earned ratio will be calculated as below:

{eq}Times\:Interest\:Earned=\displaystyle\frac{EBIT}{Interest\:Expensess} = \frac{1,582}{383} = 4.13 {/eq}


Learn more about this topic:

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Operating Cash Flow: Definition & Examples

from Finance 101: Principles of Finance

Chapter 10 / Lesson 4
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