The Kaufman Company balance sheet is shown on the next page.

Required

a. Compute the debt ratio.

b. Compute the debt/equity ratio.

c. Compute the ratio of total debt to tangible net worth.

d. Comment on the amount of debt that the Kaufman Company has.

Assets Current assets Cash $ 13,445 Short-term investments—at cost (approximate market) 5,239 Trade accounts receivable, less allowance of $ 1,590 88,337 Inventories—at lower of cost (average method) or market:

Finished merchandise $113,879 Work in process, raw materials and supplies 47,036 160,915 Prepaid expenses 8,221 Total current assets 276,157 Other assets:

Receivables, advances, and other assets 4,473 Intangibles 2,324 Total other assets 6,797 Property, plant, and equipment:

Land 5,981 Buildings 78,908 Machinery and equipment 162,425 247,314 Less allowances for depreciation 106,067 Net property, plant, and equipment 141,247 Total assets $424,201 Liabilities and Shareholders’ Equity Current liabilities:

Notes payable $ 2,817 Trade accounts payable 23,720 Pension, interest, and other accruals 33,219 Taxes, other than income taxes 4,736 Income taxes 3,409 Total current liabilities 67,901 Long-term debt, 12% debentures 86,235 Deferred income taxes 8,768 Minority interest in subsidiaries 12,075 Total liabilities 174,979 Stockholders’ equity:

Serial preferred 9,154 Common $5.25 par value 33,540 Additional paid-in capital 3,506 Retained earnings 203,712 249,912 Less cost of common shares in treasury 690 Total shareholders’ equity 249,222 Total liabilities and shareholders’ equity $424,201