Compute the various financial ratios and interpret the firm's financial health during the fiscal-year 2009. Note that the balance sheet and the income statement entries in this problem are not complete. Only relevant entries are listed. Do not attempt to add individual entries to confirm either current assets or current liabilities. Please show details.
a) Debt Ratio = Total Liabilities/Total Assets
= $2,041,876/$4,834,696
= 0.42
Working note: $2,041,876 ($4,834,696 - $2,792,820)
Hence, the debt ratio is 0.42.
b) Times-Interest-Earned Ratio = Earnings before Interest and Tax expense (EBIT) or Net Income + Interest Expense + Tax Expense/Interest Expense
= ($293,935 + $36,479 + $138,407)/$36,479
= $468,821/$36,479
= 12.85
Hence, Times-Interest-Earned Ratio is 12.85.
c) Current Ratio = Current Assets/Current Liabilities
= $3,994,084/$1,113,186
= 3.59
Hence, Current Ratio is 3.59.
d) Quick (acidity test) ratio = Current Assets - Inventory/Current Liabilities
= $3,994,084 - $1,080,083/$1,113,186
= $2,914,001/$1,113,186
= 2.62
Hence, Quick (acidity test) ratio is 2.62.
Note: As per HOMEWORKLIB RULES, first four sub parts are answered. Hence, please post the remaining sub parts in separate questions.
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