Brief Exercise 10-14 Suppose the 2017 adidas financial statements contain the fo

Question

Brief Exercise 10-14 Suppose the 2017 adidas financial statements contain the following selected data (in millions) Current assets Total assets Current liabilities Total liabilities Cash $4,590 Interest expense 8.970 Income taxes 2,890 Net income 5,194 $150 100 270 750 Compute the following values (a) Working capital (b) Current ratio. (Round to 2 decimal places, e.g. 6.25:1.) (c) Debt to assets ratio. (Round to 0 decimal places, e.g. 62%.) (d) Times interest earned. (Round to 2 decimal places, e.g. 6.25.) Click if you would like to Show Work for this question: millions times

Explanation / Answer

1.Working Capital

Working capital = Current Assets - Current Liabilities

= $4590 - $2890

= $1700 (Million)

2.Current Ratio

Current ratio        = Current Assets / Current Liabilities

= $4590 / $2890

= 1.59

= 1.59 : 1

                  

3. Debt to Total Assets Ratio

Debt to Total Assets Ratio      = Total Liabilities / Total Asset

                                                = $5194 / $8970

                                                = 58 %

4. Times Interest Earned

=(Net Income + Income Taxes + Interest Expense) / Interest Expense

= ($270 + $100 + $150 ) / $150

= 3.47 Times

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