Question
Ratio of Liabilities to Stockholders' Equity and Number of Times Interest Earned The following data were taken from the financial statements of Hunter Inc. for
Ratio of Liabilities to Stockholders' Equity and Number of Times Interest Earned
The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years:
Current Year Previous Year Accounts payable $988,000 $237,000 Current maturities of serial bonds payable 580,000 580,000 Serial bonds payable, 10% 2,320,000 2,900,000 Common stock, $1 par value 100,000 130,000 Paid-in capital in excess of par 1,070,000 1,070,000 Retained earnings 3,690,000 2,930,000
The income before income tax was $1,102,000 and $964,300 for the current and previous years, respectively.
a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.
Current year Previous year
b. Determine the times interest earned ratio for both years. Round to one decimal place.
Current year Previous year
c. The ratio of liabilities to stockholders' equity has and the number of times bond interest charges were earned has from the previous year. These results are the combined result of a income before income taxes and interest expense in the current year compared to the previous year.
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