Question

please complete the entire question, try and use the same format if possible

The following information was available for the year ended December 31, 2019: Earnings before interest and taxes (operating income) Interest expense Income tax expense Net income Total assets at year-end Total liabilities at year-end $120,000 30.000 35,000 55,000 400,000 200,000 Required: a. Calculate the debt ratio at December 31, 2019. (Round your answer to 1 decimal place.) b. Calculate the debt/equity ratio at December 31, 2019. (Round your answer to 2 decimal places.) c. Calculate the times interest earned for the year ended December 31, 2019. (Round your answer to 2 decimal places.) a Debt ratio b. DebuEquity ratio c Times interest earned

Answer 1

The requirements are answered as follows: ДА В C D 2 3 4 a b c Debt ratio Debt equity ratio Times interest earned 0.50 1 4 times times times Note: debt ratio is computed in times and not as %. The % symbol given in table seems to be an error. In case % is to be mentioned. 50% can be mentioned instead of 0.5 The calculations for above are as follows: Debt ratio = Total Liabilities/Total Assets =$200,000/$400,000 = 0.5 times or 50% Debt-equity ratio = Total Liabilities/Total Shareholders' equity = $200,000/$200,000 = 1 time Note: Shareholders' equity = Total assets - Total Liabilities = $400,000 - $200,000 = $200,000 Times interest earned = Earnings before interest and tax/Interest expense = $120,000/$30,000 = 4 times For any queries/doubts, please post in comment section, I would take up the same.