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babymother [125]
4 years ago
14

Long-Term Solvency Ratios Summary data from year-end financial statements of Palm Springs Company for 2017 follow.

Business
1 answer:
wolverine [178]4 years ago
5 0

Answer:

a. Compute the ratio of times-interest-earned.

times-interest-earned = EBIT / interest expense

  • EBIT = $4,839,900
  • interest expense = $2,210,000

times-interest-earned = $4,839,900 / $2,210,000 = 2.19

b. Compute the debt-to-equity ratio.

debt-to-equity ratio = total liabilities / total stockholders' equity

  • total liabilities = $900,000
  • total stockholders' equity = $400,000

debt-to-equity ratio = $900,000 / $400,000 = 2.25

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