3-16 2002E20012000nd FATo8.6x6.2x10.0X7.0X TA TO 2.0x 2.0x 2.3x 2.5x Fa turnover is expected to exceed industry average. Good. TA turnover not up to industry average. Caused by excessive current assets(A/R and inventory) Copy right C 2002 Harcourt, Inc All rights reserved
3 - 16 Copyright © 2002 Harcourt, Inc. All rights reserved. ◼FA turnover is expected to exceed industry average. Good. ◼TA turnover not up to industry average. Caused by excessive current assets (A/R and inventory). 2002E 2001 2000 Ind. FA TO 8.6x 6.2x 10.0x 7.0x TA TO 2.0x 2.0x 2.3x 2.5x
3-17 Calculate the debt. tie and EBiTda coverage ratios Debt ratio E Total debt Total assets $1,445+$500 $3497 =55.6% TIE E EBIT Int expense ≈$5026=6.3X.wo $80 Copy right C 2002 Harcourt, Inc All rights reserved
3 - 17 Copyright © 2002 Harcourt, Inc. All rights reserved. Calculate the debt, TIE, and EBITDA coverage ratios. Total debt Total assets Debt ratio = = = 55.6%. $1,445 + $500 $3,497 EBIT Int. expense TIE = = = 6.3x. $502.6 $80 (More…)
3-18 EBITDA E EC coverage EBIT+ Depr. Amort. Lease payments Interest Lease, Loan pmt expense pmt $502.6+$120+$40 $80+$40+$0 =5.5X All three ratios reflect use of debt but focus on different aspects Copy right C 2002 Harcourt, Inc All rights reserved
3 - 18 Copyright © 2002 Harcourt, Inc. All rights reserved. All three ratios reflect use of debt, but focus on different aspects. EBITDA coverage = EC = = 5.5x. EBIT + Depr. & Amort. + Lease payments Interest Lease Loan pmt. expense pmt. + + $502.6 + $120 + $40 $80 + $40 + $0