Question

Selected year-end financial statements of Cabot Corporation follow. (All sales were on credit selected balance sheet amounts at December 31, 2015, were inventory, $54,900, total assets, $209,400; common stock, $88,000; and retained earnings. $35,774,) CABOT CORPORATION Income Statenent or Year Ended December 31, 2016 $448,600 298,450 Sales Cost of goods sold Gross profit Operating expenses 150,150 98,800 4,000 47,350 19,074 Interest expense Income before taxes Income taxes 28,276 Net incone CABOT CORPORATION Balance Sheet December 31, 2016 Liabilities and Equity 16,500 4, 600 3,600 Assets $12,000 Accounts payable 8,400 Accrued wages payable 31,800 Income taxes payable 4,500 Long-term note payable, secured 38,150 by mortgage on plant assets 3,000 Common stock 149,300 Cash Short-tern investments Accounts receivable, net Notes receivable (trade) Merchandise inventory Prepaid expenses Plant assets, net 70,400 88,000 64,050 Retained earnings $247,150 Total liabilities and equity $247,150 Total assets trade) sales. These are short-term notes receivable arising from customer (

Answer 1

Ans. 6	Debt to equity ratio   =   Total debt / Total stockholder's equity
		$95,100 / $152,050
		0.63 : 1
	*Calculation of Total Debt:
	Accounts payable	$16,500
	Accrued wages payable	$4,600
	Income tax payable	$3,600
	Long term Notes payable	$70,400
	Total Debt	$95,100
	*Calculation of Total Equity:
	Common stock	$88,000
	Retained earnings	64050
	Total Equity (b)	$152,050
Ans. 7	Time interest earned =(Income before taxes + Interest expenses) / Interest expenses
		($47,350 + $4,000) / $4,000
		$51,350 / $4,000
		12.84	times