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8 August, 13:19

JKL Corporation has a projected times-interest-earned ratio of 4.0 for next year. What percentage could EBIT decline next year before JKL's times-interest-earned ratio would fall below 1.0? 3% 30% 75% 90% 300% Insufficient information is provided.

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  1. 8 August, 13:44
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    EBIT should fall by more than 75%

    Explanation:

    Interest cove is he number of times a company Earnings before interest and tax covers the interest payment.

    Current Interest cover = 4 times.

    This implies that the current EBIT is 4 times the interest payment, meaning that the interest payment would be 1.

    So for the interest cover to fall below a ratio of 1, then the EBIT should fall from 4 to a figure below 1, this will represent a change of 3 units

    The percentage decline should be greater than

    = (4-1/4) * 100

    = 75%

    So for the times interest earned to fall below 1, then the EBIT should fall by more than 75%
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Home » Business » JKL Corporation has a projected times-interest-earned ratio of 4.0 for next year. What percentage could EBIT decline next year before JKL's times-interest-earned ratio would fall below 1.0? 3% 30% 75% 90% 300% Insufficient information is provided.
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