Refer to the Kepler Company information as shown in Problem 16-45.

Required:

1. Compute the following for each year:

a. The times-interest-earned ratio

b. The debt ratio

2. Does Kepler have too much debt? What other information would help in answering this question?

Problem 16-45

Transcribed Image Text:

Kepler Company Comparative Balance Sheets This Year Last Year Assets Current assets: $ 50,000 300,000 600,000 Cash $100,000 150,000 400,000 Accounts receivable, net Inventory Prepaid expenses 25,000 $ 975,000 125,000 $1,100,000 30,000 $680,000 150,000 $830,000 Total current assets Property and equipment, net Total assets Liabilities and Stockholders' Equity Current liabilities: $ 400,000 200,000 $ 600,000 100,000 $ 700,000 Accounts payable Short-term notes payable $290,000 60,000 $350,000 150,000 $500,000 Total current liabilities Long-term bonds payable, 12% Total liabilities Stockholders' equity: Common stock (100,000 shares) 200,000 200,000 130,000 $830,000 Retained earnings Total liabilities and equity 200,000 $1,100,000