Calculator Print Item Exercise 12-79 Debt Management Ratios Financial statements for Steele Inc. follow. Steele Inc. Consolidated Income Statements (in thousands except per share amounts) 2019 2018 2017 $6,944,296 (4,953,556) $1,990,740 (1,202,042) $6,149,218 (4,355,675) $1,793,543 (1,080,843) Net sales Cost of goods sold Gross margin General and administrative expenses Special and nonrecurring items Operating income Interest expense Other income Gain on sale of investments Income before income taxes Provision for income taxes Net income $7,245,088 (5,286,253) $1,958,835 (1,259,896) 2,617 $701,556 (63,685) 7,308 $788,698 (62,398) 10,080 9,117 $712,700 (63,927) 11,529 $745,497 $660,302 (257,000) $645,179 (254,000) $391,179 (290,000) $455,497 $403,302 Steele Inc. Consolidated Balance Sheets (in thousands) Dec 31, 2019 Dec 31, 2018 ASSETS Current assets: Cash and equivalents $41,235 837,377 Accounts receivable Inventories Other $320,558 1,056,911 733,700 109,456 $2,220,625 1,666,588 247,892 $4,135,105 Total current assets Property and equipment, net 803,707 101,811 $1,784,130 1,813,948 248,372 $3,846,450 Other assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: $309,092 274,220 Accounts payable Accrued expenses Other current liabilities $250,363 347,892 15,700 93,489 137.466 $720,778 5707 444 Income taxes Total current liabilities $720,778 Total current liabilities Long-term debt Deferred income taxes Other long-term liabilities $707,144 650,000 275,101 541,639 274,844 41,572 61,267 Total liabilities 1,693,812 1,578,833 Stockholders' equity: Preferred stock Common stock Additional paid-in capital-common stock Retained earnings $100,000 89,727 $100,000 89,727 127,776 2,136,794 128,906 2,397,112 $2.715,745 $2.454,297 (274,452) (186,680) $2,441,293 $2.267,617 Less: Treasury stock, at cost Total stockholders' equity Total liabilities and stockholders' equity $4,135,103 $3,846.450 Required: 1. Compute the five debt management ratios for 2018 and 2019. Round your answers to two decimal places, 2019 2018 Times interest earned Retained earnings 2,197,112 2,136,794 $2,454,297 $2.715,745 (274,452) (186,680) Less: Treasury stock, at cost Total stockholders' equity Total liabilities and stockholders' equity $2.441,293 $2,267,617 $4,135,105 $3,846,450 Required: 1. Compute the five debt management ratios for 2018 and 2019. Round your answers to two decimal places. 2019 2018 Times interest earned Debt to equity ratio Debt to total assets ratio Long term debt to equity ratio Long-term debt to total assets ratio 2. Conceptual Connection: Indicate whether the ratios have changed significantly from 2018 to 2019. Times interest earned ratio decreased, other ratios did not change by much Do the ratios suggest that Steele is more or less risky for long-term creditors at December 31, 2019, thanat December 31, 2018? Less risky for long term creditors
