Use the financial statements of Allstott, Inc., in exercises S11-6 and S11-7.
1. Compute the company's debt ratio at December 31, 2017.
2. Compute the company's times-interest-earned ratio for 2017. For operating income, use income before both interest expense and income taxes. You can simply add interest expense back to income before taxes.
3. Is Allstott's ability to pay liabilities and interest expense strong or weak? Comment on the value of each ratio computed for questions 1 and 2?
In exercise S11-6

Company Quick (Acid-Test) Ratio
Baker, Inc. (Utility)............................................................................. 0.71
Calvin Company (Department store)................................................. 1.01
Dunn Companies Limited (Grocery store)......................................... 1.05
In Exercise S11-7

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Allstott, Inc. Balance Sheets (Adapted) As at December 31, 2017 and 2016 Increase (Decrease) 2016Amount Percentage 3 (dollar amounts in millions) 4 Assets 2017 Current assets: Cash and cash equivalents Short-term investments Receivables, net Inventories $1,200$900 300 33.3% 70 250 81 (64) (91.4) (4.0) 18.5 363 (120(33.1) 240 (10) 10 id expenses and other assets 243 Total current assets 121 235 133 106 $7,2356,64O 595 1,664 3,63,376 878 722 1,785 12 lant, ande t, net Intangible assets Other assets 1,011 828 15.1 14.7 Total assets 9.0% 15 16 Liabilities and Shareholders' Equit 17 18 19 Current liabilities Accounts payable Income tax Short-term debt Other $1,000900 100 (22) 36.1) 6.3 able 61 118 70 1,227 73 1,145 2,944 1,036 5,125 21 Total current liabilities debt 82 556 81 719 7.2 18.9 7.8 14.0 23 3,5002, Long-term Other liabilities 1,117 5,844 25 Total liabilities 26 27 28 29 30 31 Shareholders' equity Common shares Retained earnin Accumulated other com 1,5431,689(146) (8.6) 12.5 Total shareholders Total liabilities and shareholders'e (loss) (54(176) 1,515 1,391 (124) (8.2) 9.0% 7,2356,640 595 Allstott, Inc. Statements of Income (Adapted) Year Ended December 31, 2017 and 2016 2 (dollar amounts in millions) 3 Revenues 4 2017 $9,500 2016 9,309 nses Food and (Cost of sold) 2,509 2,138 2,413 1,217 2,644 2,211 2,375 1,148 6 Payroll and employee benefits and other o tin General and administrative ex Interest expense Other 184 10 11 Income before income taxes 12 Income tax expense 13 Net income 14 (34) 848 267 $ 581 income), net 1,020 285 $ 735