## FA Mod 7 Interest coverage ratio reverse practice exam questions

 Author Message NEAS Supreme Being         Group: Administrators Posts: 4.2K, Visits: 1.2K FA Module 7 Interest coverage ratio reverse practice exam questions(The attached PDF file has better formatting.)A firm has ●    an effective tax rate of 10%●    an interest coverage ratio of 5.5●    a fixed charge coverage ratio of 4.7●    net income of 229Question 7.1: Tax expenseWhat is the firm’s tax expense?Answer 7.1: 229 × 10% / (1 – 10%) = 25.44(tax expense = net income × effective tax rates / (1 – effective tax rate)Question 7.2: Interest expenseWhat is the firm’s interest expense?Answer 7.2: (229 + 25.44) / (5.5 – 1) = 56.54interest expense = (net income + tax expense) / (interest coverage ratio – 1)Question 7.3: Other fixed chargesWhat are the firm’s other fixed charges (besides interest expense)? Answer 7.3: (229 + 25.44 – 56.54 × (4.7 – 1) ) / (4.7 – 1) = 12.23(Other fixed charges = (net income + tax expense – interest expense × (fixed charge coverage ratio – 1) ) / (fixed charge coverage ratio – 1) ) Attachments FA Module 7 Interest coverage ratio reverse practice exam questions.pdf (105 views, 24.00 KB)
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