The Following Information Was Available for the Year Ended December

question 26

Essay

The following information was available for the year ended December 31, 2019:
$$\begin{array} { l r } \text { Earnings before interest and taxes (operating income) } & \$ 9 7 , 5 0 0 \\\text { Interest expense } & 15,000 \\\text { Income tax expense } & 22,500 \\\text { Net incorne } & 60,000 \\\text { Total assets at year-end } & 288,000 \\\text { Total liabilities at year-end } & 216,000\end{array}$$ Required:
(a.)Calculate the debt ratio at December 31, 2019.
(b.)Calculate the debt/equity ratio at December 31, 2019.
(c.)Calculate the times interest earned for the year ended December 31, 2019.

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Definitions:

Financial Assets

Resources having economic value that are held by an individual or corporation, primarily including stocks, bonds, and cash equivalents.

Entrepreneur

A profit-seeking decision maker who starts with an idea, organizes an enterprise to bring that idea to life, and assumes the risk of the operation

Profit

Reward for entrepreneurial ability; sales revenue minus resource cost.

Tangible

Refers to physical assets or goods that can be seen, touched, and valued, as opposed to intangible assets like intellectual property.