The financial statements of

Colvin

Corporation follow:

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(Click the icon to view the assets section of the balance sheet.)

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(Click the icon to view the liabilities and stockholders' equity sections of the balance sheet.)

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(Click the icon to view the income statement.)Read the requirements

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.

1. Calculate the company's debt ratio at December 31,

2021.

Select the formula and then enter the amounts to calculate the debt ratio. (Enter currency amounts in millions as given in the question. Enter the debt ratio as a decimal to two places. X.XX.)

Total liabilities		Total assets	=	Debt ratio
			=

2. Calculate the company's times-interest-earned ratio for

2021.

For operating income, use income from operations. (Enter currency amounts in millions as given in the question. Round your answer to one decimal place, X.X.)

Income from operations

Interest expense

=

Times-interest-earned ratio

=

3. Is

Colvin's

ability to pay liabilities and interest expense strong or weak? Comment on the value of each ratio calculated for questions 1 and 2.The debt ratio is

. The times-interest earned ratio is

high

low

. Overall the company's ability to pay its liabilities and interest expense looks

bad

good

mixed

.

Colvin Corportion
Balance Sheets (Adapted)
December 31, 2021 and 2020
				Increase (Decrease)
(Dollar amounts in millions)		2021	2020	Amount	Percentage
Assets
	Current assets:
	Cash and cash equivalents	$1,170	$1,100	$70	6.4	%
	Short-term investments	220	44	176	400.0
	Receivables, net	140	230	(90)	(39.1)
	Inventories	124	108	16	14.8
	Prepaid expenses and other assets	204	394	(190)	(48.2)
	Total current assets	1,858	1,876	(18)	(1.0)
	Property, plant, and equipment, net	4,514	3,390	1,124	33.2
	Intangible assets	1,100	810	290	35.8
	Other assets	760	690	70	10.1
	Total assets	$8,232	$6,766	$1,466	21.7	%

Colvin Corporation
Balance Sheet (Adpated)
December 31, 2021 and 2020
				Increase (Decrease)
(Dollar amounts in millions)		2021	2020	Amount	Percentage
Liabilities and Stockholders' Equity
	Current liabilities:
	Accounts payable	$946	$910	$36	4.0	%
	Income tax payable	38	88	(50)	(56.8)
	Short-term debt	170	140	30	21.4
	Other	71	76	(5)	(6.6)
	Total current liabilities	1,225	1,214	11	0.9
	Long-term debt	4,429	3,002	1,427	47.5
	Other liabilities	1,190	1,090	100	9.2
	Total liabilities	6,844	5,306	1,538	29.0
	Stockholders' equity:
	Common stock	2	2
	Retained earnings	1,506	1,608	(102)	(6.3)
	Accumulated other comprehensive (loss)	(120)	(150)	30	20.0
	Total stockholders' equity	1,388	1,460	(72)	(4.9)
	Total liabilities and stockholders' equity	$8,232	$6,766	$1,466	21.7	%

Colvin Corporation
Statements of Income (Adapted)
Year Ended December 31, 2021 and 2020
	(Dollar amounts in millions)	2021	2020
	Net revenues	$9,620	$8,200
	Cost of goods sold	3,712	4,400
	Gross profit	5,908	3,800
	General and administrative expenses	3,800	3,000
	Income from operations	2,108	800
	Interest expense, net	527	200
	Income before income taxes	1,581	600
	Provision for income taxes	1,100	290
	Net income	$481	$310

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