Ratios Analyzing Long Term Firm Solvency The following information is available
ID: 2531489 • Letter: R
Question
Ratios Analyzing Long Term Firm Solvency The following information is available for Antler Company 2013 2012 $108,000 $102,000 223,500 205,000 516,500 415,000 320,000 400,000 425,000 Annual Data Interest expense Income tax expense Net income Capital expenditures ash provided by operating activities 390,000 Year-End DataDec. 31, 2013 Dec. 31, 2012 Total liabilities Total stockholders' equity 4,000,000 $2.220,000 $1,900,000 3,600,000 Calculate the following (Round to two decimal points.) a. 2013 debt-to-equity ratio. b. 2013 times-interest-earned ratio. 2013 operating-cash-flow-to-capital-expenditures ratio.Explanation / Answer
Answer a.
Debt-to-equity Ratio = Total Liabilities / Total Stockholders’ Equity
Debt-to-equity Ratio = $2,220,000 / $4,000,000
Debt-to-equity Ratio = 0.56
Answer b.
EBIT = Net Income + Interest Expense + Income Tax Expense
EBIT = $516,500 + $108,000 + $223,500
EBIT = $848,000
Times Interest Earned Ratio = EBIT / Interest Expense
Times Interest Earned Ratio = $848,000 / $108,000
Times Interest Earned Ratio = 7.85 times
Answer c.
Operating Cash Flow to Capital Expenditures Ratio = Cash Provided by Operating Activities / Capital Expenditure
Operating Cash Flow to Capital Expenditures Ratio = $425,000 / $320,000
Operating Cash Flow to Capital Expenditures Ratio = 1.33
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