Fraction Corporation has provided the following financial data: Year 2Year 1Total assets$1,447,000 $1,430,000 Total liabilities$310,000 $310,000 Total stockholders' equity$1,137,000 $1,120,000 Net operating income$38,571 Interest expense$10,000 Required:a. What is the company's times interest earned ratio for Year 2?b. What is the company's debt-to-equity ratio at the end of Year 2?c. What is the company's equity multiplier at the end of Year 2?
What will be an ideal response?
a.
Times interest earned ratio = Earnings before interest expense and income taxes ÷ Interest expense
= $38,571 ÷ $10,000 = 3.86 (rounded)
b.
Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity
= $310,000 ÷ $1,137,000 = 0.27 (rounded)
c.
Equity multiplier = Average total assets* ÷ Average stockholders' equity**
= $1,438,500÷$1,128,500 = 1.27 (rounded)
*Average total assets = ($1,447,000 + $1,430,000) ÷ 2 = $1,438,500
**Average stockholders' equity = ($1,137,000 + $1,120,000) ÷ 2 = $1,128,500
You might also like to view...
In terms of substantiation of advertising claims, the Federal Trade Commission (FTC) and the courts state that evidence presented must be for the exact product being tested, not for a similar product, regardless of similarity
Indicate whether the statement is true or false
Covenants not to compete are illegal per se
Indicate whether the statement is true or false
The integration of the lowest level of the WBS with the organizational units responsible for performing the work is known as
A. Process breakdown structure. B. Organization breakdown structure. C. Priority matrix. D. Work breakdown structure. E. Responsibility matrix.
The United States taxes its citizens on their worldwide incomes.
Answer the following statement true (T) or false (F)