Billy Covington is a loan analyst for DotBanc. DotBanc accepts online business loan applications. The data are stored in a spreadsheet ("data set"). Billy imports this data into an analysis spreadsheet and calculates the debt to total assets ratio, debt to stockholders' equity ratio, and times interest earned ratio. The calculated ratios are used to screen applicants for further evaluation. To qualify, a company must have a debt to total assets ratio of less than 0.5, debt to total equity of less than 1.0, and a times interest earned ratio of at least 5. In calculating the ratios, DotBanc makes certain assumptions as follows: Total equity is the sum of paid-in capital and retained earnings. Total assets equal total equity plus total liabilities. Total interest cost is 7% of total liabilities. Use the accompanying data set to calculate the indicated ratios. Identify companies that meet the preliminary screening.

DATA SET Applicant Total Liabilities Paid-in Capital Retained Earnings Net Income for Past Year Taxes for Past Year Berkley 5,000,000 2,000,000 2,000,000 1,000,000 250,000 Costnor 2,500,000 1,000,000 500,000 400,000 100,000 Dalia 3,000,000 400,000 5,200,000 500,000 110,000 Fergusen 500,000 700,000 3,500,000 800,000 90,000 Hernandez 2,000,000 200,000 700,000 600,000 75,000 Indio 1,600,000 1,200,000 8,000,000 250,000 50,000 Jordanson 4,400,000 5,000,000 (400,000) (60,000) - Kervin 3,000,000 1,500,000 1,800,000 10,000 1,000 Lensmire 600,000 500,000 500,000 250,000 60,000

CALCULATIONS: Debt to Total Assets Debt to Equity Times Interest Earned Berkley Costnor Dalia Fergusen Hernandez Indio Jordanson Kervin Lensmire