1. You have been asked to evaluate the long-term borrowing position of Client, Inc. However, you were given only the following limited information. Bonds payable, 12% $1,000,000 Stockholders' cquity 1,800,000 Current assets 1,870,000 Tangible assets, net 1,600,000 Intangible assets 40,000 Investments 120,000 Other assets 90,000 Sales 4,000,000 Operating expenses 3,620,000 Required: Assuming that this is the only information you will receive, estimate the following ratios: a Times interest earned ratio b. Debt ratio c. Debt/equity ratio d. Debt to tangible net worth ratio 2-Aristocrats Art reported the following trend analysis to its bank as an attachment to a loan application. 2010 2009 2008 Fixed Charge Ratio 4.00 2.50 1.54 Times Interest Earned Ratio 4.943.27 2.08 Debt Ratio 0.47 0.51 0.56 Debt to Tangible Net Worth Ratio 0.91 1.06 1.36 You have been asked to evaluate the long-term borrowing capacity. You know that a rule of thumb for this industry for the debt/ equity ratio is 1 to 1. Required: a Compute the debt/equity ratio for 2010, 2009, and 2008, using the debt ratio as a guide. b. Comment on the long-term borrowing ability of this firm. 3- Following is a list of paired ratios and transactions. For cach transaction, indicate the effect of that transaction on the specific ratio. Use + for increase - for decrease, and 0 for no effect. Transaction Ratio a A firm is required to capitalize leases previously Debt Ratio of 0.4 presented only in notes. b. A firm sells its own common stock Debt/Equity Ratio of 1.12 c. A firm has an increase in selling expense with no Times Interest Eamed Ratio of 6.2 to 1 change in other expenses. d. A firm writes off a sizeable account receivable, Times Interest Eamed Ratio of 3.6 to 1 A firm pays cash for a valuable patent. Debt to Tangible Net Worth Ratio of 1.3 to 1 c