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Problem 10-06A a Suppose you have been presented with selected information taken from the financial statements of Southwest ACapital expenditures 960 1,355 Cash dividends 10 17 (a) Calculate each of the following ratios for 2022 and 2021 2022 2021 :1

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Answer #1

Answer of Part 1:

For 2022:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $2,835 / $2,835
Current Ratio = 1:1

For 2021:

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $4,850 / $4,780
Current Ratio = 1.01:1

Answer of Part 2:

For 2022:

Free Cash Flow = Cash Provided by Operations – Capital Expenditures
Free Cash Flow = -$1,600 - $960
Free Cash Flow = -$2,560

For 2021:

Free Cash Flow = Cash Provided by Operations – Capital Expenditures
Free Cash Flow = $2,725 - $1,355
Free Cash Flow = $1,370

Answer of Part 3:

For 2022:

Debt to Assets Ratio = Total Liabilities / Total Assets
Debt to Assets Ratio = $9,370 / $13,685
Debt to Assets Ratio = 68.47%

For 2021:

Debt to Assets Ratio = Total Liabilities / Total Assets
Debt to Assets Ratio = $9,725 / $17,360
Debt to Assets Ratio = 56.02%

Answer of Part 4:

For 2022:

EBIT = Net Income + Income Tax Expense + Interest Expenses
EBIT = $170 + $100 + $125
EBIT = $395

Times Interest Earned = EBIT / Interest Expense
Times Interest Earned = $395 / $125
Times Interest Earned = 3.16 times

For 2021:

EBIT = Net Income + Income Tax Expense + Interest Expenses
EBIT = $630 + $410 + $107
EBIT = $1,147

Times Interest Earned = EBIT / Interest Expense
Times Interest Earned = $1,147 / $107
Times Interest Earned = 10.72 times

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