Computation of receivables collection period and leverage

Reference no: EM1317443

Computation of receivables collection period and leverage effect of the debt

1. Receivables: Chick's Chicken has average accounts receivable of $6,333. Sales for the year were $9,800. What is its average collection period?

2. Leverage Ratios. Lever age pays an 8% rate of interest on $10 million of outstanding debt with face value $10 million. The firm's EBIT was $1 million.

a. What is times interest earned?

b. If depreciation is $200,000, what is cash coverage?

c. If the firm must retire $300,000 of debt for the sinking fund each year, want is its "fixed payment ash-coverage ratio" (the ratio of cash flow to interest plus other fixed debt payments)?

Reference no: EM1317443

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