EX-12.1 11 dex121.htm COMPUTATION OF RATIO OF EARNINGS TO FIXED CARGES Computation of Ratio of Earnings to Fixed Carges

THE CHARLES SCHWAB CORPORATION

 

Exhibit 12.1

 

Computation of Ratio of Earnings to Fixed Charges

(Dollar amounts in millions)

(Unaudited)

 

    

Three Months Ended

June 30,

   

Six Months Ended

June 30,

     2007
    2006
    2007
    2006

Earnings from continuing operations before taxes on earnings

     $   424      $   369    $      815    $   722

Fixed charges

                            

Interest expense:

                            

Brokerage client cash balances

      89      107      185      216

Deposits from banking clients

      63      47      122      77

Long-term debt

      7      8      14      15

Other

      5      6      10      11
    
  
  
  

Total

      164      168      331      319

Interest portion of rental expense

      14      14      29      27
    
  
  
  

Total fixed charges (A)

      178      182      360      346
    
  
  
  

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

     $   602      $   551    $   1,175    $   1,068
    
  
  
  
                             

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

      3.4      3.0      3.3      3.1
    
  
  
  

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

      17.3      14.2      16.4      14.6
    
  
  
  

(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.