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The Morris corporation has $600,000 of debt outstanding and it pays an interest rate of 8% annually. Morris's annual sales are $3 million, its average tax rate is 40% and its net profit margin on sales is 3%. If the company does not maintain a TIE ratio of at least 5 to 1, then its bank will refuse to renew the loan and bankruptcy will result. SHOW ALL WORK.

A) What is Morris's TIE ratio?

B) What is the firms operating margin?

C) Holding sales constant, at what operating margin would the bank refuse to renew the loan?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92365379

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