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Times-Interest-Earned Ratio The Morris Corporation has $700,000 of debt outstanding, and it pays an interest rate of...

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Finance

Times-Interest-Earned Ratio

The Morris Corporation has $700,000 of debt outstanding, and itpays an interest rate of 10% annually. Morris's annual sales are$3.5 million, its average tax rate is 35%, and its net profitmargin on sales is 3%. If the company does not maintain a TIE ratioof at least 5 to 1, then its bank will refuse to renew the loan,and bankruptcy will result.

1. What is Morris's TIE ratio? Do not round intermediatecalculations. Round your answer to two decimal places.

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