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Assoli18 [71]
3 years ago
9

The following information was available for the year ended December 31, 2019: Earnings before interest and taxes (operating inco

me) $ 75,000 Interest expense 15,000 Income tax expense 20,000 Net income 40,000 Total assets at year-end 250,000 Total liabilities at year-end 140,000 Required: Calculate the debt ratio at December 31, 2019. (Round your answer to 1 decimal place.) Calculate the debt/equity ratio at December 31, 2019. (Round your answer to 2 decimal places.) Calculate the times interest earned for the year ended December 31, 2019. (Round your answer to 2 decimal places.)
Business
1 answer:
Charra [1.4K]3 years ago
6 0

Answer:

Debt ratio = 56%

Times Interest earned = 5 times

Explanation:

<em>The debt ratio is the proportion of the total assets amount that is financed by debt . It is a measure of financial risk. A company with a high debt ratio (in excess of 50%) is considered financially risky. That is may not be able to meet its short term financial obligations</em>

Debt ratio = Debt/Total assets × 100

              = (140,000/250,000)× 100

              = 56%

Times interest earned is the number of times the earning before interest and taxes (EBIT) can pay the interest obligation. It is a measure of financial risk. For example, a company with a ratio of less than 3 times might be considered as potentially unable to meets its loan obligation

Times interest earned = Earnings before interest and tax (EBIT)/Interest expense

= 75,000/15,000

= 5 times.

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Answer:

Instructions are below.

Explanation:

Giving the following information:

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February= 2,120 units

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The desired ending balance for February is 4,000 pounds.

The purchases of direct material are calculated using the following formula:

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February (in pounds):

Production= 2,120*5= 10,600

Desired ending inventory= 4,000

Beginning inventory= (4,240)

Total purchase= 10,360 pounds

Total cost= 10,360*45= $466,200

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