a) The following financial information regarding Wick Industries is available.

Total liabilities	$150 000
Total equity	400 000
Total assets	550 000
Income tax expense	20 000
Net income	35 000
Operating cash flows	125 000
Interest expense	15 000

Wick would like to increase its return to stockholders. To do so, it wants to increase its debt to assets ratio to 0.70 by issuing debt and buying back common stock.

Required

i. Calculate Wicks current debt to equity, debt to assets and times interest earned ratios. (3 marks)

ii. Explain three key risks that Wick will have to consider. (3 marks)

b) What is depreciation? Explain why depreciation is shown in the Income Statement and not in the Cash Flow Statement (2 marks)

c) Below are extracted data from the accounting information system Sweet Wines Ltd over a number of years:

Calculate the (i) missing figures, (ii) prepare the Income Statement (Statement of Financial Performance) and (iii) comment on Sweet Wines Ltd performance for the following income statement items:

• Sales Revenue
• Profit before income tax and finance cost
• Profit after tax