$ 275 500 560 BALANCE SHEET BIG VALLEY ENTERPRISES Assets Liabilities and Equity Income Statement Cash $ 10 Current Liabilities $ 160 Cash Sales Accounts receivable 80 Long-Term Debt 230 Credit sales Inventory 115 Common Stock 75 Operating Expenses Fixed Assets 400 Retained Earnings 140 Depreciation Total $ 605 Total $ 605 Interest Taxes Net Income Interest is Big Valley's only fixed cash charge. Big Valley's market value of equity to book value of debt ratio=1.5 100 55 30 2 Peer Average Ration Current Ratio Quick Ratio Days Sales in Receivables Sales to Working Capital Sales to Fixed Assets Times Interest Earned Debt to Asset Ratio Return on equity 1.35 0.5 50 14 1.8 4 50 15% Big Valley's use of debt to finance assets indicates that Big Valley has the typical firm in the industry, more long-term solvency risk than the same long-term solvency risk as less interest expense than less long-term solvency risk than a lower market value of equity to book value of equity ratio than