SaveMart Had Income Before Interest Expense and Income Taxes of $12,581

question 54

Essay

SaveMart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million. Valueland had income before interest expense and income taxes of
$3,596 million and interest expense of $1,143 million. Calculate the times interest earned for each company and comment on the results.

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Definitions:

Deposit Insurance

A protection scheme that guarantees a depositor's money in the event of a bank failure, up to a certain limit.

Big Banks

Large financial institutions that hold a significant portion of a country's total banking assets.

Moral Hazard

A situation in which one party engages in risky behavior knowing that it is protected against the consequences, often because another party bears the cost of those actions.

Deposits Insured

A guarantee by a government or private entity that deposits in banks and financial institutions will be protected up to a certain limit in case of bank failure.