RATIO ANALYSIS Rising Stars Academy provided the following information on its 2009 Balance Sheet and Statement of Cash Flows:

Long-term debt $ 4,400 Interest expense $ 398 Total liabilities 8,972 Net income 559 Total assets 38,775 Interest payments 432 Total equity 29,803 Cash flows from operations 1,015 Income tax expense 266 Income taxes paid 150 Required:

. Calculate the following ratios for both companies:

a. debt to equity

b. debt to total assets

c. long-term debt to equity

d. times interest earned (accrual basis)

e. times interest earned (cash basis)

. Interpret these results.

Exercise