ENT 401: Chapter 13 Homework- Leverage Ratios Use the following financial statements to calculate the leverage ratios for Bellog Brothers Remodeling Belfor Brothers Remodeling Balance Sheet Assets Current Assets Cash Inventory Accounts Receivable 2015 2016 $22,950 $51,086 $30,600 $32,500 $75.225 $67,450 Total Current Assets $128,775 $151,035 Plant, Property and Equipment $53,050 $53,050 Less: Accumulated Depreciation ($1,875) ($2,450) Total Plant, Property and Equipment $51,175 $50,600 Total Assets $179.950 $201.636 Liabilities and Owners' Equity Liabilities Current Liabilities Accounts Payable $22,950 Current Portion of Bank Loan Payable $3,500 $24,960 $4,500 Total Current Liabilities $26,450 $29,480 Long-Term Liabilities Bank Loan Payable $76.500 $72,000 Total Long-Term Liabilities $76.500 $72.000 Total Liabilities $102,950 $101,480 Owners' Equity Owners' Investment $43,000 $43,000 Retained Earnings $34.000 $57,156 Total Owners' Equity $77,000 $100,156 $179.950 $201,636 Total Liabilities and Owners' Equity Belfor Brothers Remodeling Profit and Loss Statement Sales Activities Revenue 2015 2016 $445,600 $493,445 Cost of Goods Sold $211.056 $232,717 Gross Profit $234,544 $260,728 Operating Expenses Selling Expenses $66,000 $66,600 General and Administrative Expenses $133,800 $140,662 Equipment Lease Payments $11,600 $14,400 Depreciation Operating Profit Interest Profit Before Taxes Income Taxes Net Profit Belfor Brothers Remodeling Financing Activity Financing Activity Cach Inflour from Financing Activity $575 $22,569 $575 $38,491 $9.600 $9,180 $12,969 $29,311 $2.723 $6,155 $10.246 $23.156 2015 2016 Financing Activity Depreciation Operating Profit Interest Profit Before Taxes Income Taxes Net Profit Belfer Brothers Remodeling Financing Activity $575 $575 $22,569 $38,491 $9,600 9.180 $12,969 $29,311 $2.723 $10.246 $6.155 $23.156 2015 2016 Cash Inflows from Financing Activity Loan Proceeds $40,000 Total Inflows From Financing Activity Cash Outflows from Financing Activity Principal Payments $2.500 $3.500 Total Cash Outflows from Financing Activity $2.500 $3.500 1. Calculate the debt to equity ratio for 2015 and 2016 Show your calculation work and put the awer in the table below. 2. Calculate the interest coverage ratio for 2015 and 2016. Show your calculation work and your answer in the table below 3. Calculate the fixed payment coverage ratio for 2015 and 2016. Show your calculation work and put your answer in the table below Belfer Brothers Remodeling Debt to Equity Interest Coverage Fixed Payment Coverage 2015 2016 4. Using the Debe Equity calculation above, das whether the diabl undavorable to a banker and why? y 5. Using the leverage ratio calculations above, disc whether a lender is Brothers Remodeling more favorably at the end of 2015 or at the end of 2016 Explain your Answer 6. In your opinion, why is it important for business owners to calculate and track their leverage ratios