Question

Some recent financial statements for Smolira Golf, Inc., follow. SMOLIRA GOLF, INC. Balance Sheets as of December 31, 2009 and 2010 2009 2010 2010 2009 Liabilities and Owners' Equity Assets Current assets Current liabilities Accounts payable Notes payable Other $ 2,188 1,785 97 3,001 $ 2,957 4,732 12,618 Cash 2,670 2,186 114 Accounts receivable 5,711 13,712 Inventory 4,070 4,970 Total $20,351 $ 22,380 Total $14,000 16,760 Long-term debt Owners' equity Common stock $41,500 $ 41,500 15,689 and paid-in surplus Accumulated retained earnings Fixed assets 39,623 Total $57,189 81,123 54,908 80,473 Net plant and equipment $75,259 $102,853 $75,259 102,853 Total assets Total liabilities and owners' equity SMOLIRA GOLF, INC. 2010 Income Statement 188,770 126,903 5,263 Sales Cost of goods sold Depreciation 56,604 1,360 EBIT Interest paid Taxable income 55,244 19,335 Taxes $35,909 Net income Dividends 11,975 23,934 Retained earnings

Answer 1

2009 2010 Debt-equity ratio Total debt/Total equity 0.27 times 0.32 times h. (4070+14000)/57189 4970+16760)/81123 Equity multiplier 1+D/E 1.27 times 1.32 times i. =1+0.32 1+0.27 j.Times interest earned EBIT/Interest 41.62 times =56604 / 1360 k. Cash coverage ratio 45.49 times (EBIT Depreciation)/Interest 56604+5263)/1360