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Why calculate times interest charges earned?

A metric used to measure a company's ability to meet its debt obligations. It is calculated by taking a company's earnings before interest and taxes (EBIT) and dividing it by the total interest payable on bonds and other contractual debt. It is usually quoted as a ratio and indicates how many times a company can cover its interest charges on a pretax basis. Failing to meet these obligations could force a company into bankruptcy. Also referred to as "interest coverage ratio" and "fixed-charged coverage." Investopedia explains 'Times Interest Earned - TIE' Ensuring interest payments to debt holders and preventing bankruptcy depends mainly on a company's ability to sustain earnings. However, a high ratio can indicate that a company has an undesirable lack of debt or is paying down too much debt with earnings that could be used for other projects. The rationale is that a company would yield greater returns by investing its earnings into other projects and borrowing at a lower cost of capital than what it is currently paying to meet its debt obligations.


Is the properties of a metal are related to bonds true or false?

true.


What is difference between confirmation and confirmation?

Conformation is the spatial arrangement of atoms in a molecule that can come about through free rotation of atoms about a single chemical bond. It can be changed without breaking bonds. Example. rotation about single bonds produce the cis-trans, and E-Z conformationsespecially of organic molecules.(Think: Conformation: orbiting)Confirmation is the religious ceremony of a bishop praying for the indwelling of the Holy Spirit in a baptised Christian.Read more: http://wiki.answers.com/What_is_the_difference_between_conformation_and_configuration#ixzz1Q7ew2V25


Concalent bonds can best be described as a sharing of electrons true or false?

There are two types of chemical bonds, covalent and ionic. Ionic involve the complete transfer of electrons and covalent involve the sharing of electrons.


A combined total of 24000 is invested in two bonds that pay 7.5 and 9 simple interest The total annual interest is 1935 How much is invested in each bond?

x = the amount of money that was invested at the first bond y = the amount of money that was invested at the second bond x + y = 24,000 so, y = 24,000 - x 0.075x + 0.09y = 1935 0.075x + 0.09(24,000 - x) = 1935 0.075x + 2160 - 0.09x = 1935 -0.015x = - 225 0.015x = 225 x = 225/0.015 x = 15,000, this is the amount of money that was invested in the first bond y = 24,000 - x y = 24,000 - 15,000 y = 9,000, this is the amount of money that was invested in the second bond Check it: 15,000 x 0.075 = 1,125 9,000 x 0.09 = 810 1,125 + 810 = 1,935

Related Questions

What is the relationship between bonds and interest rates?

The relationship between bonds and interest rates is inverse. When interest rates go up, bond prices go down, and vice versa. This is because bond prices are influenced by the prevailing interest rates in the market.


How do fluctuations in interest rates impact the value of bonds in a financial portfolio?

Fluctuations in interest rates can impact the value of bonds in a financial portfolio. When interest rates rise, the value of existing bonds decreases because newer bonds offer higher yields. Conversely, when interest rates fall, the value of existing bonds increases as they offer higher yields compared to newer bonds. This relationship between interest rates and bond values is known as interest rate risk.


What is the difference between taxable and tax-exempt bonds?

Taxable bonds are subject to federal income tax on the interest earned, while tax-exempt bonds are not subject to federal income tax on the interest earned.


How do changes in interest rates impact the relationship between bonds and their value?

Changes in interest rates have an inverse relationship with bond values. When interest rates rise, bond values decrease, and when interest rates fall, bond values increase. This is because existing bonds with lower interest rates become less attractive compared to new bonds with higher interest rates.


What is the impact of long convexity on bond prices in a changing interest rate environment?

Long convexity in bonds refers to the relationship between bond prices and changes in interest rates. In a changing interest rate environment, bonds with long convexity are more sensitive to interest rate movements compared to bonds with short convexity. This means that when interest rates rise, the price of bonds with long convexity will decrease more than bonds with short convexity, and vice versa.


What is the difference between interest and a dividend?

Interest is a payment on debt (such as bonds or bank notes). A dividend is a distribution of earnings to the owners of a firm.


Why does a company that issues bonds between interest dates collect accrued interest from the bonds' purchasers?

It makes the interest payment process easier - if accrued interest is collected when the bond is sold, then the payment to all bondholders is the same: the interest amount for 3 or 6 months, or whatever the payment period is


What happens to the bonds between atoms during a chemical change?

They break and new bonds are formed


Which earns interest stocks or bonds?

bonds


What has the author Pierluigi Balduzzi written?

Pierluigi Balduzzi has written: 'The central tendency' -- subject(s): Bonds, Econometric models, Interest rates, Prices 'A model of target changes and the term structure of interest rates' -- subject(s): Interest rates, Mathematical models


Is there a difference between accounting for conversion of bonds and accounting for the conversion of preferred stock?

Bonds have discounts and premiums and accrued interest. Preferred Stock doesn't.


Do fixed bonds have higher rates than bonds with fluctuating interest?

Fixed bonds don't necessarily have higher rates than bonds with fluctuating interest. An interesting feature of bonds is that their rates tend to go down as interest rates in general go up. A fixed rate bond will yield the same return no matter what the economy does, but a fluctuating interest bond's rate could go up if the general interest rate goes down or vice versa. So really, the important determining factor of which type of bond performs better is the economy in general.