Ratio of Liabilities to Stockholders' Equity and Times InterestEarned
The following data were taken from the financial statements ofHunter Inc. for December 31 of two recent years:
Current Year Previous Year Accounts payable $522,000 $140,000 Current maturities of serial bonds payable 320,000 320,000 Serial bonds payable, 10% 1,300,000 1,620,000 Common stock, $1 par value 60,000 70,000 Paid-in capital in excess of par 670,000 680,000 Retained earnings 2,330,000 1,850,000
The income before income tax was $469,800 and $411,100 for thecurrent and previous years, respectively.
a. Determine the ratio of liabilities tostockholders' equity at the end of each year. Round to one decimalplace.
Current year Previous year
b. Determine the times interest earned ratiofor both years. Round to one decimal place.
Current year Previous year
c. The ratio of liabilities to stockholders'equity has improved and the times interest earnedratio has improved from the previous year. Theseresults are the combined result of a larger incomebefore income taxes and lower interest expense inthe current year compared to the previous year.
Ratio of Liabilities to Stockholders' Equity and Times InterestEarned
The following data were taken from the financial statements ofHunter Inc. for December 31 of two recent years:
Current Year | Previous Year | |||
Accounts payable | $522,000 | $140,000 | ||
Current maturities of serial bonds payable | 320,000 | 320,000 | ||
Serial bonds payable, 10% | 1,300,000 | 1,620,000 | ||
Common stock, $1 par value | 60,000 | 70,000 | ||
Paid-in capital in excess of par | 670,000 | 680,000 | ||
Retained earnings | 2,330,000 | 1,850,000 |
The income before income tax was $469,800 and $411,100 for thecurrent and previous years, respectively.
a. Determine the ratio of liabilities tostockholders' equity at the end of each year. Round to one decimalplace.
Current year | |
Previous year |
b. Determine the times interest earned ratiofor both years. Round to one decimal place.
Current year | |
Previous year |
c. The ratio of liabilities to stockholders'equity has improved and the times interest earnedratio has improved from the previous year. Theseresults are the combined result of a larger incomebefore income taxes and lower interest expense inthe current year compared to the previous year.