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Times-interest-Earned Ratio Smith and Sons, Inc. Income Statement (in millions) 2016 2015 Net sales 10,300 9,800 Cost of goods sold (5,500) (5,200) Gross profit 4,800
Times-interest-Earned Ratio Smith and Sons, Inc. Income Statement (in millions) 2016 2015 Net sales 10,300 9,800 Cost of goods sold (5,500) (5,200) Gross profit 4,800 4,600 Selling and administrative expenses (2,800) (2,700) Income from operations 2,000 1,900 Interest expense (300) (250) Income before income taxes 1,700 1,650 Income tax expense (420) (400) Net income 1,280 1,250 Smith and Sons, Inc. Balance Sheet (in millions) 2016 2015 Assets Current assets Cash and cash equivalents 450 650 Accounts receivable 900 800 Inventory 750 900 Other current assets 400 250 Total current assets 2,500 2,600 Property, plant & equipment, net 2,350 2,250 Other assets 5,700 5,900 Total Assets 10,550 10,750 Liabilities and Stockholders' Equity Current liabilities 3,250 3,150 Long-term liabilities 5,000 5,400 Total liabilities 8,250 8,550 Stockholders' equity-common 2,300 2,200 Total Liabilities and Stockholders' Equity 10,550 10,750 Calculate the times-interest-earned ratio for Smith & Sons, Inc., for 2015 and 2016. Round answers to two decimal places. 2015 0 2016 0 Did the company's ability to pay its current interest charges improve over the two years? OThe decrease in ratio indicates that Smith & Son's ability to pay its current interest charges from operating income improved. OThe increase in ratio indicates that Smith & Son's ability to pay its current interest charges from operating income declined. OThe decrease in ratio indicates that Smith & Son's ability to pay its current interest charges from operating income declined. OThe increase in ratio indicates that Smith & Son's ability to pay its current interest charges from operating income improved
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