Computing long-term debt to total assets

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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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