Suppose a Firm Wants to Maintain a Specific TIE Ratio

question 71

True/False

Suppose a firm wants to maintain a specific TIE ratio.It knows the amount of its debt, the interest rate on that debt, the applicable tax rate, and its operating costs.With this information, the firm can calculate the amount of sales required to achieve its target TIE ratio.

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Definitions:

Money

A medium of exchange that is widely accepted in transactions for goods and services and the repayment of debts.

Profitability Index

A financial tool used to determine the desirability of an investment or project, calculating the ratio of the present value of future cash flows to the initial investment cost.

Mutually Exclusive

Decision scenarios or events that cannot happen simultaneously; choosing one option excludes the possibility of selecting the other.