Chrome File Edit View History Bookmarks People Window Help , 75% i, Fri 8:15 PM

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Chrome File Edit View History Bookmarks People Window Help , 75% i, Fri 8:15 PM Q E ad × Matthew | e Dezto.mheducation.com/hm.tpx SMOLIRA GOLF CORP 2014 and 2015 Balance Sheets Liabilities and Owners' Equity 2014 Assets 2014 2015 2015 Current assets Current liabilities Cash Accounts receivable 24,116 13,148 26,392 24,800 15,900 27,800 Accounts payable Notes payable Other $23,884 17,000 12,271 $ 27,800 11,500 15,700 Total $63,656 68,500 Total $53,155 S 55,000 $76,000 S 94,000 Long-term debt Owners' equity Common stock and paid-in surplus 40,000 226,196 S 40,000 245,000 Accumulated retained earnings Total Total liabilities and owners' equity Fixed assets Net plant and equipment $331,695 $365,500 $266,196 $285,000 Total assets $395,351 $434,000 $395,351 $434,000 SMOLIRA GOLF CORP 2015 Income Statement Sales Cost of goods sold S396,340 256,000 49,000 $ 91,340 15,000 Eanings before interest and taxes Interest paid Taxable income Taxes (40%) Net income $ 76,340 30,536 S 45,804 Dividends Retained earnings 27,000 18,804 8

Explanation / Answer

Answer h.

Debt-equity Ratio = (Current Liabilities + Long-term Debt) / Owners’ Equity

2014:

Debt-equity Ratio = ($53,155 + $76,000) / $266,196
Debt-equity Ratio = 0.49 times

2015:

Debt-equity Ratio = ($55,000 + $94,000) / $285,000
Debt-equity Ratio = 0.53 times

Answer i.

Equity Multiplier = Total Assets / Owners’ Equity

2014:

Equity Multiplier = $395,351 / $266,196
Equity Multiplier = 1.49 times

2015:

Equity Multiplier = $434,000 / $285,000
Equity Multiplier = 1.52 times

Answer j.

Times Interest Earned = EBIT / Interest Paid
Times Interest Earned = $91,340 / $15,000
Times Interest Earned = 6.09 times

Answer k.

Cash Coverage Ratio = Cash / Interest Paid
Cash Coverage Ratio = $24,800 / $15,000
Cash Coverage Ratio = 1.65 times

Answer l.

Profit Margin = Net Income / Sales
Profit Margin = $45,804 / $396,340
Profit Margin = 11.56%

Answer m.

Return on Assets = Net Income / Total Assets
Return on Assets = $45,804 / $434,000
Return on Assets = 10.55%

Answer n.

Return on Equity = Net Income / Owners’ Equity
Return on Equity = $45,804 / $285,000
Return on Equity = 16.07%

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