Calculate financial leverage measures The following information was availablefor the year ended December 31, 2013: Earnings before interest andtaxes (operating income) . . . . . $60,000Interest expense . . . . . . . . . . . . . . 10,000Income tax expense . . . . . . . . . . . 15,000Net income . . . . . . . . . . . . . . . . . . $ 35,000Total assets at year-end . . . . . . . . 200,000Total liabilities at year-end . . . . . . 120,000Required:a. Calculate the debt ratio at December 31, 2013.b. Calculate the debt/equity ratio at December 31, 2013.c. Calculate the times interest earned for the year ended December 31, 2013.
Calculate financial leverage measures The following information was availablefor the year ended December 31, 2013: Earnings before interest andtaxes (operating income) . . . . . $60,000Interest expense . . . . . . . . . . . . . . 10,000Income tax expense . . . . . . . . . . . 15,000Net income . . . . . . . . . . . . . . . . . . $ 35,000Total assets at year-end . . . . . . . . 200,000Total liabilities at year-end . . . . . . 120,000Required:a. Calculate the debt ratio at December 31, 2013.b. Calculate the debt/equity ratio at December 31, 2013.c. Calculate the times interest earned for the year ended December 31, 2013.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Calculate financial leverage measures The following information was available
for the year ended December 31, 2013:
Earnings before interest and
taxes (operating income) . . . . . $60,000
Interest expense . . . . . . . . . . . . . . 10,000
Income tax expense . . . . . . . . . . . 15,000
Net income . . . . . . . . . . . . . . . . . . $ 35,000
Total assets at year-end . . . . . . . . 200,000
Total liabilities at year-end . . . . . . 120,000
Required:
a. Calculate the debt ratio at December 31, 2013.
b. Calculate the debt/equity ratio at December 31, 2013.
c. Calculate the times interest earned for the year ended December 31, 2013.
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