Reference no: EM133204084
Assignment - Global Campus Ratio Analysis Exercises and Problems
RATIO ANALYSIS EXERCISES AND PROBLEMS - Use the net income statement for Summer Peebles, Inc., below, to do the following assigned problems.
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 $2,600.00
Additional Information:
1. The following changes occurred in current assets and current liabilities for 2015:Current AccountsIncrease (Decrease)Current AccountsIncrease (Decrease)Accounts Receivable $900.00Notes Payable to Bank-$200.00Inventories-$800.00Accounts Payable $700.00Dividend 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) $600.00Amortization of Bond Premium-$300.00Interest on Capitalized Leases $140.00Interest Incurred $440.00Less Interest Capitalized-$40.00Interest 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.
Required -
1. Compute the following earnings coverage ratios:
i. Earnings to fixed charges.
ii. Cash flow to fixed charges.
iii. Earnings coverage of preferred dividends.
2. Analyze and interpret the earnings coverage ratios in (A).
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