Company Expenses Total Assets Net Income Total Llablitles $22,000 67,000 12,000 $ 40,000 150,000 $19,000 $30,000 147,000 17,000 DreamWorks Pixar 27,000 Universal 68,000 5,000

Which of the following statements are true about the interest-burden ratio? Check all that apply: It can be expressed as EBIT/Interest Expense. If the company has no financial leverage, the interest-burden ratio will be equal to 0. A company with higher financial leverage will have a lower interest-burden ratio. If the company has no financial leverage, the interest-burden ratio will be equal to 1. It can be expressed as Net profits/Pretax profits.

Suppose a firm wants to maintain a specific TIE ratio. It knows the amount of its debt, the interest rate on that debt, the applicable tax rate, and its operating costs. With this information, the firm can calculate the amount of sales required to achieve its target TIE ratio. a. True b. False

1. Discuss how using debt ratios applies to a business.