Exercise 12-9 Pharoah Medical manufactures hospital beds and other institutional furniture. The company's comparative balance sheet and income statement for 2015 and 2016 follow. 2015 Pharoah Medical Comparative Balance Sheet As of December 31 2016 Assets Current assets Cash $416,000 Accounts receivable, net 1,014,000 Inventory 765,000 Other current assets 355,000 Total current assets 2,550,000 Property, plant, & equipment, net 8,775,640 Total assets $11,325,640 $417,500 776,450 681,100 247,100 2,122,150 8,440,085 $10,562,235 Liabilities and Stockholders' Equity Current liabilities Long-term debt Total liabilities Preferred stock, $5 par value Common stock, $0.25 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $3,199,000 3,737,000 6,936,000 61,000 135,000 4,193,640 4,389,640 $11,325,640 $2,846,100 3,892,700 6,738,800 58,950 103,800 3,660,685 3,823,435 $10,562,235 Pharoah Medical Comparative Income Statement and Statement of Retained Earnings For the Year 2016 2015 Sales revenue (all on account) $10,177,250 $9,614,000 Cost of goods sold 5,611,600 Gross profit 4,565,650 4,315,300 Operating expenses 2,840,300 2,634,150 Net operating income 1,725,350 1,681,150 Interest expense 302,700 308,600 Net Income before taxes 1,422,650 1,372,550 426,795 $995,855 411,765 $960,785 Income taxes (30%) Net Income Dividends paid Preferred dividends Common dividends Total dividends paid Net income retained Retained earnings, beginning of year Retained earnings, end of year 29,450 433,450 462,900 532,955 3,660,685 $4,193,640 29,450 413,000 442,450 518,335 3,142,350 $3,660,685 Calculate the following leverage ratios for 2016. (Round all answers to 2 decimal places, e.g. 2.55% or 2.55.) a. Debt ratio b. Debt-to-equity ratio C. Times interest earned ratio times