Reference no: EM132691649

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	200,000
Serial bonds payable, 10%	1,000,000	1,200,000
Common stock, $10 par value	250,000	250,000
Paid-in capital in excess of par	1,250,000	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?