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Problem - Ratio of liabilities to stockholders' equity and times interest
The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years:
Current Year
Previous Year
Accounts payable
$ 924,000
$ 800,000
Current maturities of serial bonds payable
200,000
Serial bonds payable, 10%
1,000,000
1,200,000
Common stock, $10 par value
250,000
Paid-in capital in excess of par
1,250,000
Retained earnings
860,000
500,000
The income before income tax expense was $480,000 and $420,000 for the current and previous years, respectively.
Required -
a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.
b. Determine the times interest earned ratio for both years. Round to one decimal place.
c. What conclusions can be drawn from these data as to the company's ability to meet its currently maturing debts?
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