In the past year, TVG had revenues of $3million, cost of goods sold of $2.

5 million, and
depreciation expense of $200,000. The firm has a single issue of debt outstanding with
face value of $1 million, market value of $.92 million, and a coupon rate of 8%. What is
the firm's times interest earned ratio?

EBIT
Times Interest Earned =
Interest Expense

Revenue $3,000,000
Less: Cost of Goods Sold $2,500,000

Gross Profit $500,000

Less: Depreciation Expense $200,000

EBIT $300,000

Less: Interest ($1,000,000 × 8%) $80,000

EBT $220,000

$300, 000
TIE =
$80, 000

= 3.75