8.00 points The balance sheet for Shaver Corporaion reported the following: cash
ID: 2574311 • Letter: 8
Question
8.00 points The balance sheet for Shaver Corporaion reported the following: cash, S8,500; short-term investments, $13,500; net accounts recevable, $42,000; inventory, S47,000, prepaids, $13,500; equipment, $101,000; current iabilities, $47.000; notes payable (long-term), ST7,000; total stockholders' equity, S160000, net ncome, $4,020; interest expense, S5, 800, income before income taxes, $7.380. 1. Compute Shaver's debt-to-assets ratio and times interest eamed ratio. (Round your answers to 2 decimal places.) Ratio Debt-to-Assets Times Interest Earned 2-a. Based on these ratios, does it appear Shaver relies mainly on debt or equity to finance its assets? Debt O Equity 2-b. Is it probable that Shaver will be able to meet its future interest obligations? Yes NoExplanation / Answer
Debt To Asset Ratio Total Debt/Total Assets Total Debt Current Liability+Notes Payable Total Debt 47000+77000 Total Debt 124000 Total Asset Cash+Short Term Investment+Net Account Recivable+Inventory+Prepaid+Equipments Total Asset 8500+13500+42000+47000+13500+101000 Total Asset 225500 Debt To Asset Ratio 124000/225500 Debt To Asset Ratio 54.99 Times Interest Earned Ratio EBIT/Interest Exenses EBIT Earnig Before Income Taxes+Interest EBIT 7380+5800 EBIT 13180 Times Interest Earned Ratio 13180/5800 Times Interest Earned Ratio 2.27 Question 2A Shaver Relies Mainely on Debts as more than 54% asstes are financed by debts Question 2B Yes, As Shavers EBIT is Two times of its interest obliation, therefore it is expected that shavers will able to meet its future obligations in future also
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