Homework Answers
a. 2016 debt to equity ratio = Total debt/Total equity = $2400000/$4000000 = 60%
b. 2016 times interest earned ratio = EBIT/Interest expense = $790000/$90000 = 8.78 times
EBIT = Net income + Income tax expense + Interest expense = $496500 + $203500 + $90000 = $790000
c. 2016 operating cash flow to capital expenditures ratio = Cash provided by operating activities/Capital expenditures = $425000/$320000 = 1.33
Note: In the absence of specific instructions, ratios have been rounded off to 2 decimal places. Kindly round off as required.
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