Solution-Computing long-term debt to total assets

Computing long-term debt to total assets

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Reference no: EM132722962

Question - Presented below are the consolidated balance sheets and income statements for Cape Town Enterprises Company, Inc.: (In thousands)

	Year 2	Year 1
Cash	$10,300	$12,800
Accounts receivable	14,700	13,750
Inventory	14,200	16,700
Marketable securities	8,700	12,950
Equipment, net	90,780	84,564
Total assets	$138,680	$140,764
Accounts payable	$14,000	$11,000
Income taxes payable	9,650	5,000
Current portion of long-term debt	12,250	6,500
Long-term obligations	54,780	49,764
Common stock	16,000	27,500
Retained earnings	32,000	41,000
Total liabilities & shareholders' equity	$138,680	$140,764
Sales	$137,400	$147,000
Cost of goods sold	48,000	42,000
Depreciation expense	12,800	14,700
Other operating expenses	24,500	24,000
Interest expense	2,695	3,190
Income before taxes	49,405	63,110
Income taxes expense	17,400	22,200
Net income	$32,005	$40,910

Required -

A. Evaluate the company's solvency by computing long-term debt to total assets, long-term debt to shareholders' equity, and interest coverage ratio for both years.

B. What other debt may appear in the footnotes to the financial statements that may affect a firm's credit risk?

Reference no: EM132722962

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Computing long-term debt to total assets

Reference no: EM132722962

Reference no: EM132722962

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