What is the "Fixed Payment Coverage Ratio? I have included the data below.
Earnings before interest and taxes = $3,085,000
Lease Payment = $188,000
Interest Expense=1,035,000
Principal Payments = $781,000
Preferred Stock Dividends = $88,200
Formula I was given to use:
Earnings before interest and taxes + Lease Payments
Interest + Lease Payments +
+(Principal payments + Preferred Stock dividends) x [1/(1-7))
Tax rate is 40%, I am not sure what to indicate for this [1/(1-7])
Or where the [1/(1-7]); primarily the 7 opposed to a 4.