short assignment 64

The Manor Company has OMR (800) thousand of debt outstanding, and it pays an interest of OMR (80) thousand annually: Manor’s annual sales are OMR (2) million, its tax rate is 30%, and its net profit margin (NPM) on sales is 8%. If the company does not maintain a TIE ratio of at least (3) times, then its bank will refuse to renew the loan and bankruptcy will result.

1. Calculate the current Manor’s TIE ratio.

2. Is the current Manor’s TIE ratio will qualify the company to renew the loan ?And why?

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Al Buraimi company has financial leverage multiplier equal to 2.5 times what the debt ratio of the company?