A Firm Has EBIT of $400,000 and Depreciation Expense of $20,000

question 112

Multiple Choice

A firm has EBIT of $400,000 and depreciation expense of $20,000. Fixed charges total $50,000. Interest expense totals $7,000. What is the firm's fixed-charge coverage ratio?

• A) 7.60 times
• B) 8.00 times
• C) 8.40 times
• D) 8.54 times

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Definitions:

Planning Budget

A budget prepared before a period begins, outlining the financial plans and the expected outcomes for that period.

Total Expenses

The aggregate amount of all costs and expenses, both fixed and variable, incurred by a business, organization, or individual.

Shipping Container

A large standard-sized metal box used for transporting goods by sea, land, or air.

Static Budget

A budget based on a fixed set of assumptions and output levels, not adjusting for changes in business activity.