EX-12.1 4 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)

 

     Three Months Ended
March 31,
     2007
    2006

Earnings from continuing operations before taxes on earnings

   $ 391    $ 353

Fixed charges

              

Interest expense:

              

Brokerage client cash balances

      96      109

Deposits from banking clients

      59      30

Long-term debt

      7      7

Other

      5      5
    
  

Total

      167      151

Interest portion of rental expense

      15      13
    
  

Total fixed charges (A)

      182      164
    
  

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

    $ 573    $ 517
    
  

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

      3.1      3.2
    
  

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

      15.5      15.1
    
  

(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 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 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.