Question

The following information was available for the year ended December 31, 2019 Earnings before interest and taxes (operating income) Interest expense Incore tax expense Net income Total assets at year-end Total liabilities at year-end $ 66,000 12,000 17.000 37.000 220,000 120,000 Required: a. Calculate the debt ratio at December 31, 2019. (Round your answer to 1 decimal place.) b. Calculate the debt/equity ratio at December 31, 2019. (Round your answer to 2 decimal places.) c. Calculate the times interest earned for the year ended December 31, 2019. (Round your answer to 2 decimal places Debt ratio b. DebuEquity ratio c. Times interest earned

Answer 1

a.

Debit ratio = Total liabilities/Total assets

= 128,000/220,000

= 58.1%

b.

Equity = Total assets - Total liabilities

= 220,000-128,000

= $92,000

Debt equity ratio = Total liabilities/Equity

= 128,000/92,000

= 1.39 times

c.

Times interest earned = ( Net income + Interest expense + Income tax expense)/Interest expense

= (37,000+12,000+17,000)/12,000

= 66,000/12,000

= 5.5 times

a.	Debit ratio	58.1	%
b.	Debit equity ratio	1.39	times
c.	Times interest earned	5.5	times

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