Fayer Corporation has provided the following financial data:Balance SheetDecember 31, Year 2 and Year 1AssetsYear 2Year 1Current assets:        Cash$161,000 $180,000   Accounts receivable, net 110,000  130,000   Inventory 181,000  160,000   Prepaid expenses 57,000  70,000 Total current assets 509,000  540,000 Plant and equipment, net 1,044,000  960,000 Total assets$ 1,553,000 $ 1,500,000        Liabilities and Stockholders' Equity      Current liabilities:        Accounts payable$188,000 $160,000   Accrued liabilities 57,000  60,000   Notes payable, short term 36,000  40,000 Total current liabilities 281,000  260,000 Bonds payable 200,000  200,000 Total liabilities 481,000  460,000 Stockholders'

equity:        Common stock, $4 par value 200,000  200,000   Additional paid-in capital 80,000  80,000   Retained earnings 792,000  760,000 Total stockholders' equity 1,072,000  1,040,000 Total liabilities & stockholders' equity$ 1,553,000 $ 1,500,000 Income StatementFor the Year Ended December 31, Year 2Sales (all on account)$1,220,000 Cost of goods sold 760,000 Gross margin 460,000 Operating expenses 389,846 Net operating income 70,154 Interest expense 14,000 Net income before taxes 56,154 Income taxes (35%) 19,654 Net income$  36,500 Dividends on common stock during Year 2 totaled $4,500. The market price of common stock at the end of Year 2 was $10.88 per share.The company's times interest earned ratio for Year 2 is closest to:

A. 2.61
B. 4.01
C. 5.01
D. 7.71


Answer: C

Business

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