Exhibit 19-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 82

Multiple Choice

Exhibit 19-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{c} \text { STAR CORPORATION INCOME STATEMENT} \\ \text {FISCAL YEAR ENDING 12/31/2009 } \\ \text { (DOLLARS IN THOUSANDS') } \\\begin{array}{lr}\text { Net Sales } &\quad\quad\quad\quad\quad\quad\quad \$ 1075 \\\text { Cost of Goods Sold } & \underline {706 }\\ \text { Gross Profit Margin } & 369 \\\text { Depreciation } & 30 \\\text { Operating Expense } & 109 \\\text { Administrative Expense } & \underline {129} \\\text { Operating Profit } &101\\\text { Interest }\\ \text {Profit Before Taxes}&\frac{29}{72} \\ \text { Taxes } \\ \text {Net Income }&\$\frac{21}{51} \\\end{array}\end{array}$ $\begin{array}{c} \text { STAR CORPORATION BALANCE SHEET } \\ \text { FISCAL YEAR ENDING 12/31/2009 } \\ \text { (DOLLARS IN THOUSANDS) } \\\begin{array}{lll}\text { ASSETS }\\\hline\text { Cash } & \$ 69 \\\text { Accounts receivables } & 233 \\\text { Inventory } & \underline { 348} \\\text { Total current assets } &650 \\\text { Net fixed assets } & \underline { 886} \\\\\\\\\\\text { Total assets }& \$ 1536\\\end{array}\begin{array}{lll}\text { LIABILITIES }\\\hline\text { Notes payable } & \$ 231 \\\text { Accounts payable } & 146 \\\text { Accruals } & \underline { 31} \\ \text { Total current liabilities } & 408 \\\text { Long term debt } & 318\\\text { Common stock ( } \$ 1.50 \text { par) } & 111\\\text { Paid in surplus } & 190 \\\text { Retained earnings } & \underline { 509} \\\text { Total liabilities and } & \\\quad \text { Stockholders' equity } & \$ 1536\end{array}\end{array}$
-Refer to Exhibit 19-2. What was Star's interest coverage for 2009?

• A) 4.99
• B) 2.58
• C) 3.48
• D) 5.16
• E) 6.02

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Definitions:

Dividend Payout Ratio

A financial ratio that measures the proportion of earnings a company pays out to its shareholders in the form of dividends.

Payout Ratio

The proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage of the company's total net income.

Cost Of Goods Sold

Costs that are directly incurred in the process of producing goods for sale by a company, such as labor and material expenses.