The Llama Corporation has $580,000 of debt outstanding, and it pays an interest rate of...
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Accounting
The Llama Corporation has $580,000 of debt outstanding, and it pays an interest rate of 8% annually. Llamas annual sales are $3.2 million, its average tax rate is 25%, and its net profit margin on sales is 3.2%. If the company does not maintain a TIE ratio of at least 5 to 1, then the bank will refuse to renew the loan, and bankruptcy will result. What is Llamas TIE ratio? Will the bank refuse to renew the loan?
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