Sherwill’s statement of consolidated income is as follows:
|
Net sales |
$658 |
|
Other income |
8 |
|
Costs and expenses: |
666 |
|
Cost of products sold |
418 |
|
Selling, general, and administrative expenses |
196 |
|
Interest |
16 |
|
630 |
|
|
Income before income taxes and extraordinary charges |
36 |
|
Income taxes |
18 |
|
Income before extraordinary charge |
18 |
|
Extraordinary charge—losses on tornado damage (net) |
4 |
|
Net income |
$14 |
Required
a. Compute the times interest earned.
b. Compute the fixed charge coverage.