Sanderson Company%u2019s year-end balance sheets follow. At December 31 2012 201

Question

Sanderson Company%u2019s year-end balance sheets follow.

     At December 31              2012              2011              2010
     Assets                                           
     Cash         $    26,363         $    30,517         $    31,477
     Accounts receivable, net              71,958              50,787              42,385
     Merchandise inventory              95,137              68,495              46,043
     Prepaid expenses              8,078              7,697              3,394
     Plant assets, net              232,283              216,486              191,501
              
    
    
     Total assets         $    433,819         $    373,982         $    314,800
              
    
    
     Liabilities and Equity                                           
     Accounts payable         $    110,181         $    62,571         $    40,723
     Long-term notes payable secured by
mortgages on plant assets              79,927              87,736              70,267
     Common stock, $10 par value              162,500              162,500              162,500
     Retained earnings              81,211              61,175              41,310
              
    
    
     Total liabilities and equity         $    433,819         $    373,982         $    314,800
              
    
    

The company%u2019s income statements for the years ended December 31, 2012 and 2011, follow.

For Year Ended December 31    2012    2011
Sales                   $    563,965                        $    445,039
Cost of goods sold    $    344,019                      $    289,275            
Other operating expenses        174,829                          112,595            
Interest expense         9,587                             10,236             
Income taxes         7,332                             6,676             
    
                   
         
Total costs and expenses                        535,767                             418,782
                   
                   
Net income                   $    28,198                        $    26,257
                   
                   
Earnings per share                   $    1.74                        $    1.62
                   
                   

Calculate the company%u2019s longterm risk and capital structure positions at the end of 2012 and 2011 by computing the following ratios.


6.value:
10.00 points

(1)    Debt and equity ratios. (Round your answers to 1 decimal place. Omit the "%" sign in your response.)

     2012         2011   
Debt ratio        %         %
Equity ratio        %        %
check my workeBook LinkView Hint #1references


7.value:
10.00 points

(2)    Debt-to-equity ratio. (Round your answers to 2 decimal places.)

              
2012        to      
2011        to      
check my workeBook LinkView Hint #1references


8.value:
10.00 points

(3)    Times interest earned. (Round your answers to 1 decimal place.)

    
2012    times
2011    times

Explanation / Answer

debt ratio =total liabilities/total assets

2012 = 190108/433819=0.44

2011 = 150307/373982=0.402

Equity ratio=shareholders fund/total asset

2012 = 243711/433819=0.56

2011=223675/373982=0.598

2. DEbt equity ratio= long term debt/shareholders equity

2012= 79927/243711=0.32

2011= 87736/223675=0.39

or debt equity ratio may be= total liability/shareholders equity

2012= 190108/243711=0.78

2011= 150307/223675=0.67

Time interest earned ratio=EBIT/interest

2012=45117/9587=4.71

2011= 43169/10236=4.22

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