Q1:

MARNI COMPANY
Balance Sheet
As of December 31
ASSETS
Cash	$	50,000
Accounts receivable		100,000
Inventory		200,000
Net plant and equipment		650,000
Total assets	$	1,000,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	100,000
Accrued expenses		90,000
Long-term debt		250,000
Common stock		100,000
Paid-in capital		50,000
Retained earnings		410,000
Total liabilities and stockholders' equity	$	1,000,000

MARNI COMPANY
Income Statement
For the year ended December 31
Sales (all on credit)	$	2,000,000
Cost of goods sold		1,750,000
Gross profit	$	250,000
Sales and administrative expenses		30,000
Fixed lease expenses		10,000
Depreciation		60,000
Operating profit	$	150,000
Interest expense		25,000
Profit before taxes	$	125,000
Taxes (40%)		50,000
Net income	$	75,000

Required:

1. Calculate OCF and FCF: Fixed charge coverage ratio of Marni Company = (150000 + 10000) / (10000 + 25000) = 4.57
2. Calculate the debt ratio

4. Calculate the Time interest earned
5. Calculate the Liquidity ratio