EX-12.1 6 dex121.htm COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Computation of Ratio of Earnings to Fixed Charges

THE CHARLES SCHWAB CORPORATION

 

EXHIBIT 12.1

 

Computation of Ratio of Earnings to Fixed Charges

(Dollar amounts in millions, unaudited)

 

Year Ended December 31,


   2006

   2005

   2004

   2003

   2002

Earnings from continuing operations before taxes on earnings and extraordinary gain

   $ 1,476    $ 1,027    $ 547    $ 627    $ 195
    

  

  

  

  

Fixed charges                                   

Interest expense:

                                  

Brokerage client cash balances

     426      378      113      76      164

Deposits from banking clients

     200      74      21      5      —  

Long-term debt

     29      30      28      30      40

Other

     24      19      10      18      6
    

  

  

  

  

Total

     679      501      172      129      210

Interest portion of rental expense

     52      56      65      72      68
    

  

  

  

  

Total fixed charges (A)

     731      557      237      201      278
    

  

  

  

  

Earnings from continuing operations before taxes on earnings, extraordinary gain, and fixed charges (B)

   $     2,207    $     1,584    $     784    $     828    $     473
    

  

  

  

  

Ratio of earnings to fixed charges (B) ÷ (A) (1)

     3.0      2.8      3.3      4.1      1.7

Ratio of earnings to fixed charges excluding brokerage and banking client
interest expense (2)

     15.1      10.8      6.3      6.2      2.7

(1)

The ratio of earnings to fixed charges is calculated in accordance with SEC requirements. For such purposes, “earnings” consist of earnings from continuing operations before taxes on earnings, extraordinary gain, and fixed charges. “Fixed charges” consist of interest expense as listed above, including one-third of rental expense, which is estimated to be representative of the interest factor.

 

(2)

Because interest expense incurred in connection with both payables to brokerage clients and deposits from banking clients is completely offset by interest revenue on related investments and margin loans, the Company considers such interest to be an operating expense. Accordingly, the ratio of earnings to fixed charges excluding brokerage and banking client interest expense reflects the elimination of such interest expense as a fixed charge.