Required a. Compute the following ratios for each company: 1. Times interest earned 2. Debt ratio 3. Debtfequity ratio 4. Debt to tangible net worth b. Is Barker Comme in a position to take on additional long-term debt? Explain. c. Which company has the better long-term debt position? Explain. (P 7-9 CONTINUED) Allen Company Barker Company Accounts payable $ 60,000 $165,000 Bonds payable 100,000 410,000 Preferred stock, $1 par 50,000 30,000 Common stock, $10 par 100,000 280,000 Retained earnings 46,000 100,000 Total liabilities and capital $356,000 $985,000 Income Statement For the Year Ended December 31, 201 1 Allen Company Barker Company Sales $1,050,000 $2,800,000 Cost of goods sold 725,000 2,050,000 Selling and administrative expenses 230,000 580,000 Interest expense 10,000 32,000 Income taxes 42,000 65,000 Net income $ 43,000 $ 73,000 Industry Averages: Times interest earned 7.2 times Debt ratio 40.3% Debt/equity 66.6% Debt to tangible net worth 72.7% RequiredP 7-9 Allen Company and Barker Company are competitors in the same industry. Selected financial data from their 2011 statements follow. Balance Sheet December 31, 201 1 Allen Company Barker Company Cash $ 10,000 $ 35,000 Accounts receivable 45,000 120,000 Inventory 70,000 190,000 Investments 40,000 100,000 Intangibles 11,000 20,000 Property, plant, and equipment 180,000 520,000 Total assets $356,000 $985,000