6. EX.17-13.ALGO (Algorithmic) Ratio of Liabilities to Stockholders\' Equity and

Question

6. EX.17-13.ALGO (Algorithmic) Ratio of Liabilities to Stockholders' Equity and Times Interest Earned The following da ta were taken from the financial statements of Hunter Inc. for December 31 of two recent Current Year Previous Year Accounts payable Current maturities of serial bonds payable Serial bonds payable, 10% Common stock, $1 par value Paid-in capital in excess of par Retained earnings $396,000 260,000 $119,000 260,000 1,090,000 1,350,000 80,000 640,000 2,210,000 1,750,000 60,000 640,000 The income before income tax was $472,500 and $413,400 for the current and previous years, respective termine the ratio of liabities to stockholders' equity at the end of each year. Round to one decimal p Current year Previous year b. Determine the times interest earned ratio for both years. Round to one decimal place. Current year Previous year c. The ratio of liabilities to stockholders' equity has and the times interest earned r

Explanation / Answer

Ans a Ratio of liabilities to stockholder equity Liabilities/Stockholder equity Current Year 0.6 (396000+260000+1090000)/(60000+640000+2210000) Previous Year 0.7 (119000+260000+1350000)/(80000+640000+1750000) ans 2 Times interest earned ratio Current Year 4.33 472500/109000 Previous year 3.06 413400/135000 ans c The current year ratio of liabilities to stockholder is better than previous year and also times interest earned Iis better in current year tha previous year

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