Comparative Financial Statements for Bent Stew Enterprises Are Shown Below

question 16

Multiple Choice

Comparative financial statements for Bent Stew Enterprises are shown below: $\begin{array}{lrrr}&\text { December } 31\\&2018&2017\\\text { Assets }\\\text { Current assets: }\\\text { Cash } & \$ 3,000 & \$ 800 \\\text { Accounts receivable } & 8,500 & 6,000 \\\text { Inventory } & 12,000 & 8,200 \\\text { Prepaid expenses } & 1,400 & 900 \\\text { Total current assets } & 24,900 & 15,900 \\\quad \text { Property, plant, and equipment, net } & 103,600 & 123,300 \\\text { Intangible assets, net } & \mathbf{6 4 , 0 0 0} & \underline{47,000} \\\text { Total assets } & \$ 192,500 & \$ 186,200 \\\text { Liabilities and Stockholders' Equity }\\\text { Current liabilities: }\\\text { Accounts payable } & \$ 11,000 & \$ 12,000 \\\text { Other current liabilities } & 11,800 & 3,200 \\\text { Total current liabilities } & 22,800 & 15,200 \\\text { Long-term debt } & \underline{120,000} & 128,000 \\\text { Total liabilities }& \underline{142,800}& \underline{143,200}\\\text { Stockholders' equity: }\\\text { Common stock } & 15,000 & 15,000 \\\text { Additional paid-in capital } & 20,000 & 20,000 \\\text { Retained earnings } & 14,700 & 8,000 \\\text { Total stockholders' equity }&{49,700}&43,000 \\\text { Total liabilities and stockholders' equity } &\$192,500&\$186,200\\&\text { Year Ended December } 31\\&2018&2017\\\text { Sales } & \$ 250,000 & \$ 230,000 \\\text { Cost of goods sold } & 164,000 & 142,300 \\\text { Gross margin } & 86,000 & 87,700 \\\text { Operating expenses } & 64,000 & 54,000 \\\text { Operating income } & 22,000 & 33,700 \\\text { Interest expense } & \underline{7,500} & 5,900 \\\text { Earnings before income taxes } & 14,500 & 27,800 \\\text { Income taxes } & 7,800 & 7,140 \\\text { Net earnings }&\$6,700&\$20,680\end{array}$ How much is Bent Stew's times interest earned for 2018?

• A)2.93 times
• B)37.31 times
• C)0.34 times
• D)0.89 times

---

Definitions:

Average Product

The output per unit of input, such as labor or capital, used in the production process.

Marginal Productivity Theory

A principle in economics that suggests that the addition of a unit of labor or capital leads to a change in output, essentially quantifying the extra output produced by adding one more unit of a resource.

Equilibrium Value

The price and quantity at which the supply of an item equals the demand for that item, achieving a balance in the market.

Marginal Product

The additional output that is produced as a result of utilizing one more unit of a variable input, holding other inputs constant.