Answer:
a. Compute the ratio of times-interest-earned.
times-interest-earned = EBIT / interest expense
- EBIT = $4,839,900
- interest expense = $2,210,000
times-interest-earned = $4,839,900 / $2,210,000 = 2.19
b. Compute the debt-to-equity ratio.
debt-to-equity ratio = total liabilities / total stockholders' equity
- total liabilities = $900,000
- total stockholders' equity = $400,000
debt-to-equity ratio = $900,000 / $400,000 = 2.25