Balancing Debt, Investment, and Medical Practice Expansion
Dr. Anya Sharma, despite a high income ($350K AGI), is burdened by $280,000 in student loan debt. She wants to expand her medical practice, but is unsure if she can afford to take on additional debt for equipment and staff while still managing her existing loans and personal investments. The fear of overextending herself and jeopardizing her practice’s financial health keeps her up at night.
By utilizing the Times Interest Earned Ratio Calculator, Dr. Sharma can determine if her practice's earnings are sufficient to cover its interest obligations, including both her business loan and student loan payments. Before expansion, her ratio was 3.5. After modeling potential expansion and associated debt, the calculator showed the ratio would drop to 1.8. This prompted her to restructure some existing debt and delay the expansion by six months to increase revenue, aiming for a TIE ratio of at least 2.5.
The Times Interest Earned Ratio is calculated by dividing Earnings Before Interest and Taxes (EBIT) by the total interest expense. The calculator automates this calculation, allowing for quick scenario analysis by adjusting variables such as revenue, operating expenses, and interest rates.
$15,000 in potential savings from debt restructuring, peace of mind from informed decision-making, and minimized risk of business failure.
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