Galaxy United, Inc. 2009 Income Statement ($ in thousands) Net sales $5,730 Less

Question

Galaxy United, Inc. 2009 Income Statement ($ in thousands) Net sales $5,730 Less: Cost of goods sold 4,090 Less: Depreciation 420 Earnings before interest and taxes 1,220 Less: Interest paid 28 Taxable Income 1,192 Less: Taxes 417 Net income $ 775 Galaxy United, Inc. 2008 and 2009 Balance Sheets ($ in thousands) 2008 2009 2008 2009 Cash $ 75 $ 170 Accounts payable $1,320 $1,190 Accounts rec. 980 850 Long-term debt 720 500 Inventory 1,470 1,970 Common stock $3,115 $3,405 Total $2,525 $2,990 Retained earnings 920 1,195 Net fixed assets 3,550 3,300 Total assets $6,075 $6,290 Total liab. & equity $6,075 $6,290 What is the debt-equity ratio for 2009?

Explanation / Answer

Total assets in 2009 = 6290

Total equity in 2009 = common stock in 2009 + retained earnings in 2009 = 3405 + 1195 = 4600

Debt = assets - equity = 6290 - 4600 = 1690

Debt to equity ratio = 1690/4600 = 36.7391%

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