Financial ratios: Financial leverage. The financial statements for Tyler Toys, I

Question

Financial ratios: Financial leverage. The financial statements for Tyler Toys, Inc. are shown in the popup window: E3 Calculate the debt ratio, times interest eamed ratio, and cash coverage ratio for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? What is the debt ratio for 2014? (Round to four decimal places.) What is the debt ratio for 2013? (Round to four decimal places.) What is the times interest eaned ratio for 2014? (Round to four decimal places.) What is the times interest earned ratio for 2013? (Round to four decimal places.) What is the cash coverage ratio for 2014? (Round to four decimal places.) Click to select your answer s).

Explanation / Answer

D. The debt ratio is very high and would warrant concern if the cash coverage ratio or the times earned ratio was low, but with high ratios it means they are handling therir debt well.

RATIOS FORMULA CALCULATION Debt ratio for 2014 Total debt / Total assets 11,977,700 / 14,689,400 = 81.53% Debt ratio for 2013 Total debt / Total Assets 11,067,200 / 14,119,500 = 78.38% Times interest earned for 2014 EBIT / Interest expense 3,199,300 / 375,000 = 8.53 times Times interest earned for 2013 EBIT / Interst expense 2,979,700 / 356,100 = 8.36 times Cash coverage ratio for 2014 (EBIT + Non cash expenses) / Interest expense (3,199,300 + 1,498,980) / 375,000 = 12.52 times Cash coverage ratio for 2013 (EBIT + Non cash expenses) / Interest expense (2,979,700 + 1,473,240) / 356,100 = 12.50 times

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

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