Problems on Ratio Analysis _ You are a bank loan officer and have been told that you can make a lo For confidentiality reasons, the companies are identified only as Appli The following information is extracted from the financial statements of Particulars Applicant X Total assets 400,000 Net Income 25,000 Total Debt 150,000 Interest expense 7,000 Income tax expense 15,000 Total owners equity 250,000 Required: 1. For each of the two applicants, compute the following: a. Debt ratio b.Debt to equity ratio c. Times interest earned 2. To which one of the two applicants would you recommend making a loan? Explain Debt Ratio 2 Total Liabilities I Total Assets or Total Liabilities I Total Liabilities + Equity X = 150,000 I 400,000 37.50% Y = 250,000 I 350,000 71.50% Recommend X for the loan Debt-Equity Ratio = Total Liabilites I Total Equity X = 150,000 I 250,000 60% Y = 250,000/350,000 71 ADD