Use the net income statement for Summer Peebles, Inc., below, to do the following assigned problems.

1.Compute the following earnings coverage ratios:

-Earnings to fixed charges.

-Cash flow to fixed charges.

-Earnings coverage of preferred dividends.

2.Analyze and interpret the earnings coverage ratios in (A).

Summer Peebles, Inc. Consolidated Income Statement ($ thousands) Year Ending December 31, 2015 Sales $15,000.00 Undistributed Income of Less Than 50%-Owned Affiliates $300.00 Total Revenue $15,300.00 Cost of Goods Sold $7,000.00 Selling and Administrative Expenses $2,000.00 Depreciation $600.00 Rental Expense $500.00 Share of Minority Interest in Consolidated Income $200.00 Interest Expense $400.00 -$10,700.00 Income Before Taxes $4,600.00 Income Taxes Current $900.00 Deferred $400.00 -$1,300.00 Net Income $3,300.00 Less Dividends Common Stock $300.00 Preferred Stock $400.00 -$700.00 Earnings Retained for the Year $2,600.00Additional Information: 1. The following changes occurred in current assets and current liabilities for 2015: Current Accounts Increase (Decrease) Current Accounts Increase (Decrease) Accounts Receivable $900.00 Notes Payable to Bank -$200.00 Inventories -$800.00 Accounts Payable $700.00 Dividend Payable -$100.00 2. The effective tax rate is 40%. 3. Shares of minority interests in consolidated income do not have fixed charges. 4. Interest expenses include: Interest Incurred (Except Items Below) $600.00 Amortization of Bond Premium $300.00 Interest on Capitalized Leases $140.00 Interest Incurred $440.00 Less Interest Capitalized $40.00 Interest Expense $400.00 5. Amortization of previously capitalized interest (included in depreciation) is $60. 6. Interest implicit in operating lease rental payment (included in rental expense) is $120