Computation of Debt-Related Financial Ratios
The following information comes from the financial statements of Walker Company:

Required:
Compute the following ratio values. State any assumptions that you make.
1. Debt ratio.
2. Debt-to-equity ratio.
3. Times interest earned.
4. Interpretive Question: You are a bank manager considering making a new $35,000
loan to Walker that would replace part of the existing long-term debt. You expect
Walker to repay your loan in two years. Which of the ratios computed in parts (1)
through (3) would be most useful to you in evaluating whether to make the loan
to Walker?

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Long-term debt Total liabilities $430,000 490,000 Total stockholders' equity. 360,000 Current assets 140,000 Earnings before income taxes 28,000 Interest expense 50,000