Determine the times interest earned ratio for both years

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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

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?

Reference no: EM132719570

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