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3 years ago

The following information was available for the year ended December 31, 2013:

Business

1 answer:

Cloud [144]3 years ago

3 0

Answer:

A. Debt ratio=51%

B. Debt Equity ratio = 104%

C. Times interest earned= 4.15

Explanation:

A. Calculation for the debt ratio at December 31 2013.

Using this formula

Debt ratio=Total liabilities / Total assets

Let plug in the formula

Debt ratio=$184,000/$360,000

Debt ratio =0.51×100

Debt ratio=51%

B. Calculation for debt equity ratio at December 31 2013

First step is to find the Total stockholders equity at year end .

using this formula

Total stockholders equity at year-end = Total asset- Total liabilities

Let plug in the formula

Total stockholders equity at year-end=$360,000-$184,000

Total stockholders equity at year-end=$176,000

The second step is to calculate for debt equity ratio

Using this formula

Debt Equity ratio = Total liabilities / Total stockholders equity

Let plug in the formula

Debt Equity ratio =$184,000 / $176,000

Debt Equity ratio = 1.04×100

Debt Equity ratio = 104%

C. Calculation for the times interest earned for the year ended December 31 2013

Using this formula

Times interest earned = Earnings before interest and taxes / Interest expense

Let plug in the formula

Times interest earned= $108,000 / $26,000

Times interest earned= 4.15 times

Therefore :

A. Debt ratio=51%

B. Debt/Equity ratio = 104%

C.Times interest earned= 4.15 times

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