4. Dynamic Manufacturers Inc. reported the following information in its financial statements:

                                   DYNAMIC MANFACTURERS INC.

                                  Statement of Financial Position

                                              June 30

 

Assets............................................................................................            2021                     2020

       Cash........................................................................................      $ 32,000               $ 29,000

       Accounts receivable...............................................................           7,500                    5,500

       Prepaid Insurance...................................................................           1,100                    1,450

       Inventory.................................................................................       220,000                175,000

       Building...................................................................................       145,000                155,000

       Equipment...............................................................................         36,000                  40,000

Total Assets...................................................................................     $441,600              $405,950

 

Liabilities and shareholders’ equity

       Accounts Payable...................................................................      $ 12,500               $ 14,500

       Notes Payable........................................................................         10,000                           0

       Bonds Payable........................................................................       145,000                  95,000

       Long-Term Debt.....................................................................       116,000                175,000

       Common shares.....................................................................         25,000                  25,000

       Retained earnings...................................................................       133,100                  96,450

Total liabilities and shareholders’ equity.........................................     $441,600              $405,950

 

Revenue........................................................................................     $450,000              $300,000

Operating expenses.......................................................................       300,000                210,000

Profit from operations....................................................................       150,000                  90,000

Interest expense............................................................................           6,000                    9,000

Income tax expense......................................................................         36,000                  20,250

Profit..............................................................................................     $108,000                $60,750

 

Instructions

a)    Calculate the company’s debt to equity and times interest earned ratios for each year.

b)    Determine if the change from 2020- 2021 is an improvement or deterioration.

c)    If industry averages for debt to equity is 1.5:1 and times interest earned is 6 times, are Dynamic ratios comparable?