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The balance sheet for Shaver Corporation reported the following: cash, $5,000; short-term investments, $10,000; net accounts receivable, $35,000; inventory, $40,000; prepaids, $10,000; equipment, $100,000; current

The balance sheet for Shaver Corporation reported the following: cash, $5,000; short-term investments, $10,000; net accounts receivable, $35,000; inventory, $40,000; prepaids, $10,000; equipment, $100,000; current liabilities, $40,000; notes payable (long-term), $70,000; total stockholders equity, $90,000; net income, $3,320; interest expense, $4,400; income before income taxes, $5,280.

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The balance sheet for Shaver Corporation reported the following: cash, $5,000; short-term investments, $10,000; net accounts receivable, $35,000; inventory, $40,000; prepaids, $10,000; equipment, $100,000; current liabilities, $40,000; notes payable (long-term), $70,000; total stockholders' equity, $90,000; net income, $3,320; interest expense, $4,400; income before income taxes, $5,280. 1. Compute Shaver's debt-to-assets ratio and times interest earned ratio. (Round your answers to 2 decimal places.) Debt-to-Assets Times Interest Earned Ratio 2-a. Based on these ratios, does it appear Shaver relies mainly on debt or equity to finance its assets? Debt OEquity 2-b. Is it probable that Shaver will be able to meet its future interest obligations? Yes O No

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