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Return to question Problem 12-4A Calculate risk ratios (LO12-3) The following income statement and balance sheets for VirtualRequired: Assuming that all sales were on account, calculate the following risk ratios for 2021. (Use 365 days a year. Round

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Answer #1
6) Acid Test Ratio = Cash + Accounts Receivable / Total Current Liabilities
= ($ 196000 + $ 91000) / ($ 76000 + $ 8000 + $ 20000)
= 2.8
7) Debt to equity = Total Debt / Total Equity
= ($ 76000 + $ 8000 + $ 20000 + $ 295000) / ($ 310000 + $ 237000)
= 72.9%
8) Times interest earned = Income before interest and taxes / Interest Expense
= ($ 139000 + $ 20000 + $ 58000) / $ 20000
= 10.85 times
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