How to get these answers? American Bacon Inc. financial statements are presented
ID: 2775554 • Letter: H
Question
How to get these answers?
American Bacon Inc. financial statements are presented in the table below.
Based on the information in the table, calculate the firm’s total debt-to-equity ratio.
Round the answers to two decimal places in percentage form. (Write the percentage sign in the "units" box).
Balance Sheet December 31, 2010
Cash and marketable securities
$102,000
Accounts payable
$287,000
Accounts receivable
$299,000
Notes payable
$61,200
Inventories
$628,000
Accrued expenses
$51,900
Prepaid expenses
$10,300
Total current liabilities
$400,100
Total current assets
$1,039,300
Long-term debt
$415,000
Gross fixed assets
$1,502,000
Par value and paid-in-capital
$376,000
Less: accumulated depreciation
$312,000
Retained Earnings
$1,038,200
Net fixed assets
$1,190,000
Common Equity
1,414,200
Total assets
$2,229,300
Total liabilities and owner’s equity
$2,229,300
Income statement, Year of 2010
Net sales (all credit)
$6,387,700.00
Less: Cost of goods sold
$4,726,898.00
Selling and administrative expenses
$345,000.00
Depreciation expense
$148,000.00
EBIT
$1,167,802.00
Interest expense
$50,600.00
Earnings before taxes
$1,117,202.00
Income taxes
$446,880.80
Net income
$670,321.20
Answer:
(57.64)
%
Interest Coverage ratio (Times Interest Earned)
Based on the information in the table, calculate the firm’s Interest Coverage ratio (also called Times Interest Earned). Canadian Bacon Inc. financial statements are presented in the table below.
Round the answers to two decimal places.
Balance Sheet December 31, 2011
Cash and marketable securities
$143,000
Accounts payable
$278,000
Accounts receivable
$354,000
Notes payable
$87,000
Inventories
$672,000
Accrued expenses
$65,000
Prepaid expenses
$12,500
Total current liabilities
$430,000
Total current assets
$1,181,500
Long-term debt
$284,000
Gross fixed assets
$1,675,000
Par value and paid-in-capital
$228,000
Less: accumulated depreciation
$500,000
Retained Earnings
$1,414,500
Net fixed assets
$1,175,000
Common Equity
1,642,500
Total assets
$2,356,500
Total liabilities and owner’s equity
$2,356,500
Income Statement Year of 2011
Net sales (all credit)
$3,136,600.00
Less: Cost of goods sold
$2,195,620.00
Selling and administrative expenses
$345,000.00
Depreciation expense
$146,000.00
EBIT
$449,980.00
Interest expense
$45,300.00
Earnings before taxes
$404,680.00
Income taxes
$161,872.00
Net income
$242,808.00
Answer:
(9.93)
Cash and marketable securities
$102,000
Accounts payable
$287,000
Accounts receivable
$299,000
Notes payable
$61,200
Inventories
$628,000
Accrued expenses
$51,900
Prepaid expenses
$10,300
Total current liabilities
$400,100
Total current assets
$1,039,300
Long-term debt
$415,000
Gross fixed assets
$1,502,000
Par value and paid-in-capital
$376,000
Less: accumulated depreciation
$312,000
Retained Earnings
$1,038,200
Net fixed assets
$1,190,000
Common Equity
1,414,200
Total assets
$2,229,300
Total liabilities and owner’s equity
$2,229,300
Explanation / Answer
American Bacon Inc.
Total Debt – Equity Ratio
%
57.64
Interest Coverage Ratio (Times interest earned)
23.08
From Balance Sheet
Total Current Liabilities = $ 400100
Long-Term Debt = $ 415000
Total Liabilities = $ 400100 + $ 415000 = $ 815100
Total Equity
Par Value and paid-in Capital = $ 376000
Retained Earnings = $ 1,038,200
Common Equity = $ 376000 + $ 1038200 = $ 1414200
Common Equity is also known as Shareholder’s Equity
Total Debt – Equity Ratio = Total Liabilities / Shareholder’s Equity
= $ 815100 / $1414200 = 0.57636 or 57.64%
EBIT = $ 1167802
Interest Expense = $ 50600
Interest coverage ratio = EBIT/Interest expenses = $1167802/$50600 = 23.07909 or 23.08 times
Canadian Bacon Inc.
Interest Coverage Ratio (Times interest earned)
9.93
EBIT = $ 449980
Interest Expense = $45300
Interest Coverage Ratio = EBIT/Interest Expense = $ 449980/$45300 = 9.9333 or 9.93 Times
Total Debt – Equity Ratio
%
57.64
Interest Coverage Ratio (Times interest earned)
23.08
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