exercise 11.4 8 9 Chapter 11 Financial Statement Analysis 411 te financial lever

Question

exercise 11.4

8 9 Chapter 11 Financial Statement Analysis 411 te financial leverage measures The following information was available culate financial leverage the year ended December 31, 2016: mation was available Mini-Exercise 11.4 fore interest and taxes (operating income.$120.000 Earnings Interest expense.. Income tax expense Net income Total assets at year-end Total liabilities at year-end 20,000 30,000 70,000 400,000 Required: a. Calculate the debt ratio at December 31, 2016. h Calculate the debt/equity ratio at December 31, 2016. c. Exercises a connect All applicable Exercises ara available in Connect. Identify information usn an investment decision Look forward to the Exercise 11 iied $5,000, and assume that you have decided

Explanation / Answer

a) Debt ratio = Total debt/total assets

= 240000/400000

Debt ratio = 0.60

b) Debt equity ratio = Total debt/total equity

= 240000/160000

Debt equity ratio = 1.5

c) Time interest earned = Earning before interest and tax/interest expense

= 120000/20000

Time interest earned = 6 Times

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.