2021

Net operating revenues

$32.7

Operating expenses

28.2

Operating income

4.5

Nonoperating items:

Interest expense

(0.6)

Other

(0.5)

Net income

$3.4

Total assets

$350.0

Total stockholders' equity

154.0

Baker

Plumbing Products Ltd. reported the following data in

2021

(in millions):

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(Click the icon to view the financial statements.)Compute

Baker's

leverage ratio, debt ratio, and times-interest-earned ratio, and write a sentence to explain what those ratio values mean. Use year-end figures in place of averages where needed for the purpose of calculating the ratios. Would you be willing to lend

Baker

$1 million? Why or why not? (Enter all amounts in millions.)

First, compute

Baker's

leverage ratio. Determine the formula for the leverage ratio. Then enter the amounts to calculate the leverage ratio. (Round your answer to two decimal places, X.XX.)

Average total assets		Average common stockholders' equity	=	Leverage ratio
			=

(Enter dollar amount to the nearest cent.)

This means that Baker has

of

assets for every dollar of stockholders' equity

.

Now determine the formula for the debt ratio. Then enter the amounts to calculate the debt ratio. (Round your answer to two decimal places, X.XX.)

			Total assets	=	Debt ratio
				=

(Enter dollar amount to the nearest cent.)

This means that Baker has

of

.

Determine the formula for the times-interest-earned ratio. Then enter the amounts to calculate the times-interest-earned ratio. (Round your answer to two decimal places, X.XX.)

				=	Time-interest-earned ratio
				=

(Enter dollar amount to the nearest cent.)

This means that for every dollar of

, Baker has earned

of

.

Would you be willing to lend

Baker

$1 million? State your reason.

Baker's

debt ratio is

and the company

can cover

can't cover

its existing interest expense. I

would

would not

be willing to lend

Baker

$1 million.