Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The balance sheet for Shaver Corporation reported the following: cash, $17,500; short-term investments, $22,500; net accounts receivable, $60,000, inventory, $65,000; prepaids, $22.500, equipment, $106,000;
The balance sheet for Shaver Corporation reported the following: cash, $17,500; short-term investments, $22,500; net accounts receivable, $60,000, inventory, $65,000; prepaids, $22.500, equipment, $106,000; current liabilities, $65,000; notes payable (long- term), $95.000, total stockholders' equity, $133,500; net income, $5,820; interest expense, $9,400; income before income taxes. $12,780. Required: 1. Compute Shaver's debt-to-assets ratio and times interest earned ratio. 2-a. Based on these ratios, does it appear Shaver relies mainly on debt or equity to finance its assets? 2-b. Is it probable that Shaver will be able to meet its future interest obligations?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To compute the debttoassets ratio we need to divide the total debt by the total assets In this case ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started