Please show all work Debt ratio, Ratio of Liabilities to Stockholders\' Equity,

Question

Please show all work

Debt ratio, Ratio of Liabilities to Stockholders' Equity, and Times Interest Earned Camper Company and McSead, Inc., are the two largest toy companies. Condensed liabilities and stockholders' equity from a recent balance sheet are shown for each company as follows: Camper McSead Current liabilities Long-term debt Total liabilities Total stockholders' equity Total liabilities and stockholders' equity The income from operations and interest expense from the income statement for both companies were as follows: $1,153,000 621,500 $1,774,500 3,549,000 $5,323,500 $2,661,000 1,562,100 $4,223,100 6,033,000 $10,256,100 Camper McSead Income from operations before tax $433,011.3 $1,570,800 Interest expense a. Determine the debt ratio for both companies. Round to one decimal place. Campe McSead b. Determine the ratio of liabilities to stockholders' equity for both companies. Enter your answers as decimal values rounded to one decimal place 33,700 130,900 33.31 % 41.2 % Camper 0.5 0.7 McSead c. Determine the number of times interest charges are earned for both companies. Round to one decimal place Camper McSead d. What conclusions can be drawn from these data as to the ability of these two companies to meet their interest obligations? Earnings appear more than enough for both companies to make their required interest pyments

Explanation / Answer

a. Debt ratio = Total liabilities ÷ Total liabilities and stockholders equity

b. Ratio of liabilities to stockholders equity = Total liabilities ÷ Total stockholders equity

c.

Number of times interest charges are earned = Income from operations before interest and tax ÷ Interest expense

d. Earnings appear more than enough for both companies to make their required interest payments.

Debt ratio Camper 1,774,500÷5,323,500 = 0.3333 = 33.3% McSead 4,223,100÷10,256,100 = 0.4117 = 41.2%

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

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