The Manor Company has OMR (800) thousand of debt outstanding, and it pays an interest of OMR (80) thousand annually: Manorâ€™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 Manorâ€™s TIE ratio.
2. Is the current Manorâ€™s TIE ratio will qualify the company to renew the loan ?And why?
Al Buraimi company has financial leverage multiplier equal to 2.5 times what the debt ratio of the company?