Question

The balance sheet for Shaver Corporation reported the following: cash, $10,500; short-term investments, $15,500; net accounts receivable, $46,000; inventories, $51,000; prepaids, $15,500; equipment, $117,000; current liabilities, $51,000; notes payable (long-term), $81,000; total stockholders’ equity, $123,500; net income, $4,420; interest expense, $6,600; income before income taxes, $8,580. Compute Shaver’s debt-to-assets ratio and times interest earned ratio. (Round your answers to 2 decimal places.)

Answer 1

Shaver Corporation's debt-to-assets ratio is 0.52, and the times interest earned ratio is 1.30, both rounded to two decimal places.

Step-by-step explanation:

To compute Shaver Corporation's debt-to-assets ratio and times interest earned ratio, first we need to calculate total assets and total debt. The total assets can be found by summing up all the listed assets:

Cash: $10,500

Short-term investments: $15,500

Net accounts receivable: $46,000

Inventories: $51,000

Prepaids: $15,500

Equipment: $117,000

Total Assets = $10,500 + $15,500 + $46,000 + $51,000 + $15,500 + $117,000 = $255,500

Total debt includes current liabilities and notes payable:

Current liabilities: $51,000

Notes payable (long-term): $81,000

Total Debt = $51,000 + $81,000 = $132,000

Now, the debt-to-assets ratio is:

Debt-to-Assets Ratio = Total Debt / Total Assets = $132,000 / $255,500 = 0.52 (rounded to 2 decimal places)

The times interest earned ratio (TIE) is found by dividing the income before interest and taxes by the interest expense:

Times Interest Earned Ratio = Income Before Income Taxes / Interest Expense = $8,580 / $6,600 = 1.30 (rounded to 2 decimal places)

Answer 2

Add them up and u will get the answer