The following information was available for the year ended December 31, 2016: Ea
ID: 2335116 • Letter: T
Question
The following information was available for the year ended December 31, 2016: Earnings before interest and taxes (operating income) $ 117,000 Interest expense 29,000 Income tax expense 34,000 Net income 54,000 Total assets at year-end 390,000 Total liabilities at year-end 196,000 Required: a. Calculate the debt ratio at December 31, 2016. (Round your answer to 1 decimal place.) b. Calculate the debt/equity ratio at December 31, 2016. (Round your answer to 2 decimal places.)c. Calculate the times interest earned for the year ended December 31, 2016. (Round your answer to 2 decimal places.)
The following information was available for the year ended December 31, 2016: Earnings before interest and taxes (operating income) $ 117,000 Interest expense 29,000 Income tax expense 34,000 Net income 54,000 Total assets at year-end 390,000 Total liabilities at year-end 196,000 Required: a. Calculate the debt ratio at December 31, 2016. (Round your answer to 1 decimal place.) b. Calculate the debt/equity ratio at December 31, 2016. (Round your answer to 2 decimal places.)
c. Calculate the times interest earned for the year ended December 31, 2016. (Round your answer to 2 decimal places.)
The following information was available for the year ended December 31, 2016: Earnings before interest and taxes (operating income) $ 117,000 Interest expense 29,000 Income tax expense 34,000 Net income 54,000 Total assets at year-end 390,000 Total liabilities at year-end 196,000 Required: a. Calculate the debt ratio at December 31, 2016. (Round your answer to 1 decimal place.) b. Calculate the debt/equity ratio at December 31, 2016. (Round your answer to 2 decimal places.)
c. Calculate the times interest earned for the year ended December 31, 2016. (Round your answer to 2 decimal places.)
The following information was available for the year ended December 31, 2016: Earnings before interest and taxes (operating income) $ 117,000 Interest expense 29,000 Income tax expense 34,000 Net income 54,000 Total assets at year-end 390,000 Total liabilities at year-end 196,000 Required: a. Calculate the debt ratio at December 31, 2016. (Round your answer to 1 decimal place.) b. Calculate the debt/equity ratio at December 31, 2016. (Round your answer to 2 decimal places.)
c. Calculate the times interest earned for the year ended December 31, 2016. (Round your answer to 2 decimal places.)
Explanation / Answer
a Debt ratio = Total liabilities/Total assets = 196000/390000= 50.3% b Debt/equity ratio = Total liabilities/ Total equity = 390000/(390000-196000)= 2.01 times c Times interest earned = Earnings before interest and taxes/Interest expense = 117000/29000= 4.03 times
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