Exercise 14-8 (Part Level Submission) The following selected information (in tho
ID: 2556967 • Letter: E
Question
Exercise 14-8 (Part Level Submission) The following selected information (in thousands) is available for Tarjee Limited 2018 Total assets Total liabilities Interest expense Income tax expense Net income Cash provided by operating activities Net capital expenditures Dividends paid on common shares 2017 $3,909 $3,668 2,1551,942 23 151 379 576 300 90 16 176 407 845 402 110 Calculate all possible solvency ratios for 2018 and 2017. (Round answers to 1 decimal place e.g. 6.2. Enter free cash flow amounts in thousands.) 2018 2017 Debt to total assets Free cash flow Interest coverage times timesExplanation / Answer
2018
2017
Debt to total assets
55.1%
52.9%
Free cash flow
$ 443
$ 276
Interest Coverage
37.4
24
Explanation:
Debt to total assets = total liabilities /total asset
2018:
Debt to total assets = $ 2,155,000/$ 3,909,000 = 0.551291891 or 55.1 %
2017:
Debt to total assets = $ 1,942,000/$ 3668,000 = 0.529443839 or 52.9 %
Free cash flow = Operating cash flow – capital expenditures
2018:
Free cash flow = $ 845,000 - $ 402,000 = $ 443,000 or $ 443 thousands
2017:
Free cash flow = $ 576,000 - $ 300,000 = $ 276,000 or $ 276 thousands
Interest Coverage ratio = Earnings before interest and taxes (EBIT)/Interest expenses
= (Net income + interest + taxes)/ Interest expenses
2018:
Interest Coverage ratio = ($ 407,000 + $ 16,000 + $ 176,000)/ $ 16,000
= $ 599,000/$ 16,000 = 37.4375 or 37.4 times
2017:
Interest Coverage ratio = ($ 379,000 + $ 23,000 + $ 151,000)/ $ 23,000
= $ 553,000/$ 23,000 = 24.043478 or 24.0 times
2018
2017
Debt to total assets
55.1%
52.9%
Free cash flow
$ 443
$ 276
Interest Coverage
37.4
24
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