Need Help for the X's. Debt service coverage ratio:

Solvency Analysis The following information is available from the balance sheets at the ends of the two most recent years and the income statement for the most recent year of Impact Company: Accounts payable Accrued liabilities Taxes payable Short-term notes payable Bonds payable due within next year Total current liabilities Bonds payable Common stock, $10 par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity December 31 2017 2016 $ 65,000 $ 50,000 25,000 35,000 60,000 45,000 0 75,000 200,000 200,000 $ 350,000 $ 405,000 $ 600,000 $ 800,000 $1,000,000 $1,000,000 650,000 500,000 $1,650,000 $1,500,000 $2,600,000 $2,705,000 2017 Sales revenue Cost of goods sold Gross profit Selling and administrative expense Operating income Interest expense Income before tax Income tax expense $1,600,000 950,000 $ 650,000 300,000 $ 350,000 89,000 $ 261,000 111,000 $ 150,000 Net income Other Information: a. Short-term notes payable represents a 12-month loan that matured in November 2017. Interest of 12% was paid at maturity. b. One million dollars of serial bonds had been issued ten years earlier. The first series of $200,000 matured at the end of 2017, with interest of 8% payable annually. C. Cash flow from operations was $185,000 in 2017. The amounts of interest and taxes paid during 2017 were $89,000 and $96,000, respectively. Required: 1. Compute the following for Impact Company. Round your answers to two decimal places. 2017 2016 a. The debt-to-equity ratio at December 31, 2017, and December 31, 2016 0.58 to 1 0.80 to 1 b. The times interest earned ratio for 2017 3.93 to 1 c. The debt service coverage ratio for 2017 3.16 X times 2. The company's debt-to equity ratio has decreased . The ratio is low with respect to the equity of the company. The times interest earned ratio indicates that Impact's profits before interest and taxes were almost three times X the amount of net income X . It is not wise to use the times interest earned ratio as the only indicator of solvency because it considers only the payment of interest and not the payment of principal . In addition, these payments must be made with cash not profits The debt service coverage ratio is a much better indication of the company's ability to meet its obligations because it looks at the cash from operations