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Foundations Of Financial Management
Found in: Page 82
Foundations Of Financial Management

Foundations Of Financial Management

Book edition 16th
Author(s) Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Pages 768 pages
ISBN 9781259277160

Short Answer

The Lancaster Corporation’s income statement is given below.

b. What would be the fixed-charge-coverage ratio?

Lancaster corporation



Cost of goods sold


Gross profit


Fixed charges (other than interest)


Income before interest and taxes




Income before taxes


Taxes (35%)


Income after taxes


The fixed charge coverage of Lancaster Corporation is 2.52.

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Step by Step Solution

Fixed charges coverage ratio 

Fixed charges coverage ratio is computed to know the company’s ability to cover its fixed expenses out of the profits.

Calculation of Fixed charges coverage ratio 

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