EX-12.1 17 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,

    2007    2006    2005    2004    2003

Earnings from continuing operations before taxes on earnings

   $ 1,853    $ 1,476    $ 1,027    $ 547    $ 627
                                  

Fixed charges

               

Interest expense:

               

Brokerage client cash balances

      329      426      378      113      76

Deposits from banking clients

      238      200      74      21      5

Long-term debt

      38      29      30      28      30

Other

      18      24      19      10      18
                                  

Total

      623      679      501      172      129

Interest portion of rental expense

      60      55      55      71      72
                                  

Total fixed charges (A)

      683      734      556      243      201
                                  

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

    $     2,536    $     2,210    $     1,583    $     790    $     828
                                  

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

      3.7      3.0      2.8      3.3      4.1

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

      17.0      14.7      10.9      6.0      6.2

 

(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.