Simon Company’s year-end balance sheets follow.
| At December 31 | Current Yr | 1 Yr Ago | 2 Yrs Ago | ||||||||
| Assets | |||||||||||
| Cash | $ | 34,945 | $ | 43,374 | $ | 44,312 | |||||
| Accounts receivable, net | 104,412 | 72,956 | 58,492 | ||||||||
| Merchandise inventory | 132,591 | 98,354 | 63,559 | ||||||||
| Prepaid expenses | 11,369 | 11,386 | 4,874 | ||||||||
| Plant assets, net | 327,281 | 300,308 | 276,363 | ||||||||
| Total assets | $ | 610,598 | $ | 526,378 | $ | 447,600 | |||||
| Liabilities and Equity | |||||||||||
| Accounts payable | $ | 155,080 | $ | 90,737 | $ | 57,902 | |||||
| Long-term notes payable secured by mortgages on plant assets |
114,792 | 119,856 | 98,920 | ||||||||
| Common stock, $10 par value | 162,500 | 162,500 | 162,500 | ||||||||
| Retained earnings | 178,226 | 153,285 | 128,278 | ||||||||
| Total liabilities and equity | $ | 610,598 | $ | 526,378 | $ | 447,600 | |||||
The company’s income statements for the Current Year and 1 Year
Ago, follow.
| For Year Ended December 31 | Current Yr | 1 Yr Ago | ||||||||||
| Sales | $ | 793,777 | $ | 626,390 | ||||||||
| Cost of goods sold | $ | 484,204 | $ | 407,154 | ||||||||
| Other operating expenses | 246,071 | 158,477 | ||||||||||
| Interest expense | 13,494 | 14,407 | ||||||||||
| Income tax expense | 10,319 | 9,396 | ||||||||||
| Total costs and expenses | 754,088 | 589,434 | ||||||||||
| Net income | $ | 39,689 | $ | 36,956 | ||||||||
| Earnings per share | $ | 2.44 | $ | 2.27 | ||||||||
For both the Current Year and 1 Year Ago, compute the following
ratios:
(3-a) Times interest earned.
(3-b) Based on times interest earned, is the
company more or less risky for creditors in the Current Year versus
1 Year Ago?
Complete this question by entering your answers in the tabs below.
Times interest earned.
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Solution
| Times Interest Earned | ||||||
| Choose Numerator: | / | Choose Denominator: | = | Times Interest Earned | ||
| Income before interest and taxes | / | Interest expense | = | Times interest earned | ||
| Current Year: | $ 63,502.00 | / | $ 13,494.00 | = | 4.7 | times |
| 1 Year Ago: | $ 60,759.00 | / | $ 14,407.00 | = | 4.2 | times |
Alternate answer with 2 decimal place in ratio
| Times Interest Earned | ||||||
| Choose Numerator: | / | Choose Denominator: | = | Times Interest Earned | ||
| Income before interest and taxes | / | Interest expense | = | Times interest earned | ||
| Current Year: | $ 63,502.00 | / | $ 13,494.00 | = | 4.71 | times |
| 1 Year Ago: | $ 60,759.00 | / | $ 14,407.00 | = | 4.22 | times |
The ratio improved
Working
| Current Year: | 1 Year Ago: | |
| Net income | $ 39,689.00 | $ 36,956.00 |
| Add: Interest expense | $ 13,494.00 | $ 14,407.00 |
| Add: Income tax expense | $ 10,319.00 | $ 9,396.00 |
| Income before interest and taxes | $ 63,502.00 | $ 60,759.00 |
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 34,945 $ 43,374 $ 44,312 Accounts receivable, net 104,412 72,956 58,492 Merchandise inventory 132,591 98,354 63,559 Prepaid expenses 11,369 11,386 4,874 Plant assets, net 327,281 300,308 276,363 Total assets $ 610,598 $ 526,378 $ 447,600 Liabilities and Equity Accounts payable $ 155,080 $ 90,737 $ 57,902 Long-term notes payable secured by mortgages on plant assets 114,792 119,856 98,920 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 34,945 $ 43,374 $ 44,312 Accounts receivable, net 104,412 72,956 58,492 Merchandise inventory 132,591 98,354 63,559 Prepaid expenses 11,369 11,386 4,874 Plant assets, net 327,281 300,308 276,363 Total assets $ 610,598 $ 526,378 $ 447,600 Liabilities and Equity Accounts payable $ 155,080 $ 90,737 $ 57,902 Long-term notes payable secured by mortgages on plant assets 114,792 119,856 98,920 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 32,294 $ 38,893 $ 38,527 Accounts receivable, net 93,598 67,395 53,488 Merchandise inventory 117,682 87,294 55,831 Prepaid expenses 10,295 10,009 4,369 Plant assets, net 299,017 273,035 248,985 Total assets $ 552,886 $ 476,626 $ 401,200 Liabilities and Equity Accounts payable $ 136,292 $ 78,133 $ 51,899 Long-term notes payable secured by mortgages on plant assets 100,824 107,432 87,779 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 29,254 $ 34,195 $ 35,264 Accounts receivable, net 89,400 62,900 51,400 Merchandise inventory 112,000 83,000 59,000 Prepaid expenses 9,421 8,976 3,918 Plant assets, net 255,755 238,369 206,618 Total assets $ 495,830 $ 427,440 $ 356,200 Liabilities and Equity Accounts payable $ 123,462 $ 72,237 $ 47,018 Long-term notes payable secured by mortgages on plant assets 93,216 98,311 78,720 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 32,935 $ 38,498 $ 38,545 Accounts receivable, net 89,200 62,800 51,100 Merchandise inventory 114,000 85,000 51,000 Prepaid expenses 10,606 10,106 4,283 Plant assets, net 295,220 270,804 233,072 Total assets $ 541,961 $ 467,208 $ 378,000 Liabilities and Equity Accounts payable $ 138,997 $ 81,327 $ 51,393 Long-term notes payable secured by mortgages on plant assets 104,945 110,682 86,044 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 26,445 $ 30,912 $ 31,878 Accounts receivable, net 89,500 62,900 51,500 Merchandise inventory 114,000 85,000 56,000 Prepaid expenses 8,516 8,114 3,542 Plant assets, net 209,763 199,474 179,080 Total assets $ 448,224 $ 386,400 $ 322,000 Liabilities and Equity Accounts payable $ 111,608 $ 65,302 $ 42,504 Long-term notes payable secured by mortgages on plant assets 84,266 88,872 71,162 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 26,445 $ 30,912 $ 31,878 Accounts receivable, net 89,500 62,900 51,500 Merchandise inventory 114,000 85,000 56,000 Prepaid expenses 8,516 8,114 3,542 Plant assets, net 209,763 199,474 179,080 Total assets $ 448,224 $ 386,400 $ 322,000 Liabilities and Equity Accounts payable $ 111,608 $ 65,302 $ 42,504 Long-term notes payable secured by mortgages on plant assets 84,266 88,872 71,162 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 28,921 $ 33,806 $ 35,215 Accounts receivable, net 89,500 62,500 51,800 Merchandise inventory 112,500 84,500 51,000 Prepaid expenses 9,314 8,874 3,913 Plant assets, net 254,909 237,168 217,372 Total assets $ 495,144 $ 426,848 $ 359,300 Liabilities and Equity Accounts payable $ 122,058 $ 71,416 $ 46,953 Long-term notes payable secured by mortgages on plant assets 92,156 97,193 78,611 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 28,446 $ 32,579 $ 36,403 Accounts receivable, net 84,111 58,189 47,124 Merchandise inventory 103,659 76,892 51,708 Prepaid expenses 9,253 8,640 3,927 Plant assets, net 261,536 243,532 217,838 Total assets $ 487,005 $ 419,832 $ 357,000 Liabilities and Equity Accounts payable $ 123,690 $ 70,952 $ 47,124 Long-term notes payable secured by mortgages on plant assets 92,473 97,527 80,475 Common stock,...
Simon Company’s year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash $ 26,445 $ 30,912 $ 31,878 Accounts receivable, net 89,500 62,900 51,500 Merchandise inventory 114,000 85,000 56,000 Prepaid expenses 8,516 8,114 3,542 Plant assets, net 209,763 199,474 179,080 Total assets $ 448,224 $ 386,400 $ 322,000 Liabilities and Equity Accounts payable $ 111,608 $ 65,302 $ 42,504 Long-term notes payable secured by mortgages on plant assets 84,266 88,872 71,162 Common stock,...