Refer the following table Focus Metals Inc Comparative Balance Sheet Information

Question

Refer the following table Focus Metals Inc Comparative Balance Sheet Information November 30 (millions of S) 2017 2016 $ 28 98 280 Cash Accounts receivable (net) Inventory Plant and equipment (net) Accounts payable Long-term notes payable* Common shares Retained earnings 434 2,786 2,870 238 1,820 2,380 420 287 84 322 420 770 "90% of the plant and equipment are secured by long-term notes payable Focus Metals Inc Income Statement For Year Ended November 30 (millions of $) 2017 2016 Net sales Cost of goods sold 2,940$2,142 812 1,022 $1,918 $1,330 Gross profit Operating expenses $112 770 $112 637 Depreciation expense Other expenses Total operating expenses 882 749 Profit from operations Interest expense Income tax expense $1,036 170 56 $581 204 60 Profit $810 $317

Explanation / Answer

hba Answer Formula calculation 2017 2016 Ratio 64% 79% Debt ratio Total liability / Total assets 36% 21% Equity ratio total equity/Total assets 1.38 1.08 pledged assets to secured liabilities book value of pledged asset/book value of secured liabilities 6.09 2.85 Times interest earned income before interest and tax/interest expense Calculation 2017 2016 Total liabilties (1820+322) (2380+238) 2142 2618 Total assets (28+434+84+2786) (98+280+77+2870) 3332 3325 Total equity 420+770 420+287 1190 707 Debt ratio 0.642857143 0.787368421 equity ratio 0.357142857 0.212631579 Pledged assets to secured liabilties (2786*90%)/1820 (2860*90%)/2380 1.377692308 1.081512605 Times interest earned (1036/170) (581/204) 6.094117647 2.848039216 Ratio favorable/unfavorable Debt ratio favorable,because debt of the company decreased equity ratio favorable, because equity has enhanced from previous year Pledged assets to secured liabilties unfavorable, because more assets are pledged for liabilities Times interest earned favorable,interest is decreased when comparison with its operating income

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