A firm has operating profit of $210,000 after deducting lease payments of $30,000. Interest expense is $50,000. What is the firm's fixed charge coverage?
A)6.00x
B)2.33x
C)2.00x
D)3.00x

Question

Quizplus · Accepted Answer

The fixed charge coverage ratio is calculated as (Operating Profit + Lease Payments) / (Interest Expense + Lease Payments). Here, it is ($210,000 + $30,000) / ($50,000 + $30,000) = $240,000 / $80,000 = 3.00x.

A Firm Has Operating Profit of $210,000 After Deducting Lease