From the income statement:

Depreciation expense Interest expense	$150,000 20,000
Income tax Net income	28,000 145,000

From the balance sheet:

Current liabilities	$90,000
Long-term debt	700,000
Deferred income taxes	80,000
Total Liabilities	$870,000
Preferred stock	5,000
Common stock	255,000
Premium on common stock	162,000
Retained earnings	668,000
Total Stockholders Equity	$1,090,000
Total Liabilities & Stockholders Equity	$1,960,000

1. What is the Times Interest Earned ratio? _________ /_______ = ___________

2. What is the Debt/Assets (Debt) ratio? ________________ /___________ = __________

3. What is the Debt*/Equity ratio? ________________ /___________ = __________

*Use Long-term debt

4. Consider the additional information for the above analysis:

1. Times Interest Earned: Compare the current year result above (better or worse) to

i) Company prior year result of 6.0 (better or worse?)

ii) Industry average: 5.0

Interpret your findings: Are the results acceptable? Why?

2. Debt /Equity ratio: Compare current year result above ( more or less risk) to

i) Company prior year result of 0.4

ii) Industry average: 0.5

Interpret your findings: Are the results acceptable? Why?