Required information

Skip to question

[The following information applies to the questions displayed below.] Simon Companys year-end balance sheets follow.

At December 31	Current Year	1 Year Ago	2 Years Ago
Assets
Cash	$ 31,819	$ 37,194	$ 38,356
Accounts receivable, net	89,456	67,042	51,142
Merchandise inventory	115,952	85,151	53,926
Prepaid expenses	10,144	9,666	4,093
Plant assets, net	291,940	265,870	236,083
Total assets	$ 539,311	$ 464,923	$ 383,600
Liabilities and Equity
Accounts payable	$ 135,631	$ 78,572	$ 51,142
Long-term notes payable	99,363	106,932	83,080
Common stock, $10 par value	162,500	162,500	162,500
Retained earnings	141,817	116,919	86,878
Total liabilities and equity	$ 539,311	$ 464,923	$ 383,600

The companys income statements for the current year and one year ago, follow.

For Year Ended December 31	Current Year		1 Year Ago
Sales		$ 701,104		$ 553,258
Cost of goods sold	$ 427,673		$ 359,618
Other operating expenses	217,342		139,974
Interest expense	11,919		12,725
Income tax expense	9,114		8,299
Total costs and expenses		666,048		520,616
Net income		$ 35,056		$ 32,642
Earnings per share		$ 2.16		$ 2.01

For both the current year and one year ago, compute the following ratios:

(3-a) Compute times interest earned for the current year and one year ago. (3-b) Based on times interest earned, is the company more or less risky for creditors in the Current Year versus 1 Year Ago?