A Firm Has Operating Profit of $200,000 After Deducting Lease

question 38

Multiple Choice

A firm has operating profit of $200,000 after deducting lease payments of $40,000.Interest expense is $60,000.What is the firm's fixed charge coverage?

• A) 5.00x
• B) 4.00x
• C) 3.33x
• D) 2.40x

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Definitions:

Transfer Price

The price at which goods, services or intangible properties are traded between related entities within an organization.

Buying Division

A department within a company responsible for making purchases of goods and services needed by the organization.

Selling Division

A segment of a company specifically focused on sales and distribution of products or services.

Transfer Price

The price at which divisions of a company transact with each other, used for the transfer of goods and services within an organization.