ABC COMPANY
	BALANCE SHEET
	Year 2	Year 1
Current Assets:
Cash and cash equivalents	$50,000	$35,000
Trading Securities ( at fair value)	75,000	65,000
Accounts Receivable	300,000	290,000
Inventory (at lower of cost or market)	290,000	275,000
Total Current Assets	715,000	665,000
Investments available for sale (at fair value)	350,000	300,000
Fixed Assets:
Property, Plant and Equipment (at cost)	1,900,000	1,800,000
Less: Accumulated Depreciation	(380,000)	(350,000)
	1,520,000	1,450,000
Goodwill	30,000	35,000
Total Assets	$2,615,000	$2,450,000
Current Liabilities:
Accounts Payable	$150,000	$125,000
Notes Payable	325,000	375,000
Accrued and other liabilities	220,000	200,000
Total current liabilities	695,000	700,000
Long-Term Debt:
Bonds and notes payable	650,000	600,000
Total liabilities	1,345,000	1,300,000
Stockholders' Equity:
Common Stock ( 1000,000) shares outstanding	500,000	500,000
Additional Paid in Capital	350,000	350,000
Retained Earnings	420,000	300,000
Total Equity	1,270,000	1,150,000
Total Liablities and Equity	$2,615,000	$2,450,000
The following information about ABC is related to the year ended 12/31/xx; year 2
Sales	$1,800,000
Cost of Goods Sold	(1,000,000)
Gross Profit	800,000
Operating Expenses	(486,970)
Interest Expense	(10,000)
Earnings before income tax	303,030
Income tax (34%)	$(103,030.00)
Net Income after tax	$200,000
Earnings per share	$2
Operating Cash Flow	$255,000
Yearly Dividends	$.80/per share
Market price/share	$12.00

calculate the following equations and ratios AND BRIEFLY COMMENT on the results. MUST SHOW YOUR CALCULATIONS AND EXPLAIN

Ability to Pay Long Term Debt (Solvency)

1. Debt to Equity

2. Debt Ratio

3. Times Interest Earned

4. Operating cash flow to Debt