The Financial Statements of Black Barn Company Are Given Below

question 37

Multiple Choice

The financial statements of Black Barn Company are given below. $\begin{array}{c} \text { Black Barn Company } \\\text { Income Statement (2009) }\\\begin{array}{lrr} \hline \text { Sales } & \$ 8,000,000 \\\text { Cost of goods sold } & \underline {5,260,000} \\\text { Gross profit } & 2,740,000 \\\text { Selling \& administrative expenses } & \underline {1,500,000} \\\text { Operating profit } & 1,240,000 \\\text { Interest expense } & \underline {140,000 }\\\text { Income before tax } & 1,100,000 \\\text { Tax expense } & \underline {\$ 440,000} \\ \text { Net income } & \underline {\$ 660,000} \\\end{array} \end{array}$ $\begin{array}{c}\begin{array}{lll} \text { Balance Sheet } &2009\\\\ \text { Cash } &\$ 200,000 \\ \text { Accounts receivable } & 1,200,000 \\ \text { Inventory } & \underline {1,840,000} \\ \text {Total current assets } &\$ 3,240,000 \\ \text {Fixed assets } & \underline {3,200,000} \\ \text { Total assets } & \underline {\$ 6,440,000} \\\\ \text { Accounts Payable } &\$ 800,000 \\ \text { Bank loan } & \underline {600,000} \\ \text { Total current liabilities } & \$ 1,400,000 \\ \text {Bond payable } & \underline { 900,000} \\ \text { Total liabilities } & \underline {\$ 2,300,000 }\\ \text { Common stock ( 130,000 shares) } & \$ 300,000 \\ \text {Retained earnings } & \underline {3,840,000}\\ \text { Total liabilities \& equity } & \underline {\$ 6,440,000} \\\end{array}\begin{array}{lll}2008\\\\\$ 50,000 \\ 950,000 \\ \underline { 1,500,000 }\\ \$ 2,500,000 \\ \underline { 3,000,000} \\ \underline { \$ 5,500,000 }\\\\\$ 720,000 \\ \underline { 100,000} \\ \$ 820,000 \\ \underline {1,000,000} \\ \underline {\$ 1,820,000 }\\\$ 300,000\\ \underline { 3,380,000} \\ \underline { \$ 5,500,000} \\\end{array}\end{array}$ Note: The common shares are trading in the stock market for $40 each. Refer to the financial statements of Black Barn Company. The firm's leverage ratio for 2009 is

• A) 1.65.
• B) 1.89.
• C) 2.64.
• D) 1.31.
• E) 1.56.

---

Definitions:

Sleep-Wake Cycle

The circadian rhythm that regulates periods of sleepiness and wakefulness over a 24-hour period.

Coordination

The ability to use different parts of the body smoothly and efficiently together or to organize activities harmoniously.

Learning

The process of acquiring new understanding, knowledge, behaviors, skills, values, or preferences.

Reticular Formation

A complex network of nerve pathways in the brainstem connecting the spinal cord, cerebrum, and cerebellum, and mediating overall level of consciousness.