anderson inc has 5,000,0000 debt at 10% per year, sale of 10,000,000, a tax rate of 40% and a net profit margin of 6%, what is anderson's times interest earned ratio?

To calculate Anderson Inc.'s times interest earned (TIE) ratio, we need to first determine its earnings before interest and taxes (EBIT), and then divide it by the interest expense.

Step 1: Calculate EBIT
EBIT is the company's earnings (net profit) before accounting for taxes and interest expenses. We can calculate it using the formula:

EBIT = Net Profit + Interest Expense + Tax Expense

Given information:
Net Profit Margin = 6%
Net Profit = Sale × Net Profit Margin
Tax Rate = 40%
Interest Expense = Debt × Interest Rate

Net Profit = 10,000,000 × 6% = 600,000
Interest Expense = 5,000,0000 × 10% = 500,0000
Tax Expense = Net Profit × Tax Rate = 600,000 × 40% = 240,000

EBIT = 600,000 + 500,0000 + 240,000 = 1,340,000

Step 2: Calculate TIE ratio
TIE ratio represents how many times the company's earnings can cover its interest expenses. It is given by the formula:

TIE = EBIT / Interest Expense

TIE = 1,340,000 / 500,0000 = 2.68

Therefore, Anderson Inc.'s times interest earned (TIE) ratio is 2.68. This indicates that the company's earnings are 2.68 times the size of its interest expenses.