Question

CADET CORPORATION Income Statement For Year Ended December 31, 2009 Sales $456,600 Cost of goods sold Gross profit Operating expenses 297.450 159.150 99.400 Interest expense 3,900 Income before taxes 55,850 Income taxes 22,499 $ 33,35 Net income CADET CORPORATION Balance Sheet December 31, 2009 Liabilities and Equity Accounts payable Accrued wages payable Income taxes payable Assets S 20,000 Cash 21,500 8,200 Short-term investments 4,400 Accounts receivable, net 29,400 3,700 Notes receivable (trade) Long-term note payable, secured by mortgage on plant assets 7,000 67,400 Merchandise inventory 34,150 Common stock . 85,000 Prepaid expenses 2,700 Retained earnings Total liabilities and equity 66,750 147,300 $248,750 Plant assets, net $248,750 Total assets

Compute the following:

(5) debt-to-equity ratio

(6) times interest earned

(7) net profit margin

(8) total asset turnover

Answer 1

Accounts payable	21500
Accrued wages payable	4400
Income tax payable	3700
Long-term note payable, secured by mortgage on plant assets	67400
Total liabilities	97000
Common stock	85000
Retained earnings	66750
Total equity	151750
Gross profit	159150
(-) Operating expense	99400
Operating profit	59750

(5) Debt-to-equity ratio = Total liabilities / Total equity = 97000 / 151750	0.64
(6) Times interest earned = Operating profit / Interest expense = 59750 / 3900	15.32
(7) Net profit margin = Net income / Sales = 33351 / 456600	7.30%
(8) Total asset turnover = Sales / Total assets = 456600 / 248750	1.84