Question

Thyme, Inc. has total assets of $72,000, a debt-equity ratio of 0.8, and net income of $7,700. What is the return on equity? o 24.14 percent 27.78 percent 22.56 percent 19.25 percent QUESTIONS 4 points Ivy, Inc. has sales of $359,000, cost of goods sold of $204,000, depreciation of $5,900, and interest expense of $35,100. The tax rate is 21 percent. What is the times interest earned ratio? - O 3.21 O 4.25 2.23 O 1.94

Answer 1

Total assets = Debt + Equity = $72,000

Debt = $72,000 - Equity

Debt / Equity = 0.8

($72,000 - Equity) / Equity = 0.8

$72,000 - Equity = 0.8 * Equity

$72,000 = Equity + (0.8 * Equity)

Equity = $72,000 / 1.8

= $40,000

Return on equity = Net income / Equity * 100

= $7,700 / $40,000 * 100

= 19.25%

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Question 5

Earnings before interest and taxes = Sales - Cost of goods sold - Depreciation

= $359,000 - $204,000 - $5,900

= $149,100

Times interest earned = Earnings before interest and taxes / Interest expense

= $149,100 / $35,100

= 4.25