1、 $ 21,822a. b. Cash basis times interest earned: PROBLEM 72 Recurring Earnings Excluding Interest Expense, Tax Expense, Equity Earnings, a. Times Interest Earned = and Minority Earnings Interest Expense, Including Capitalized Interest Income before income taxes $675 Plus interest 60 Adjusted income
2、$735 Interest expense $ 60 Times Interest Earned = $735 = 12.25 times per year $60b. Adjusted income from (part a) $735 1/3 of operating lease payments (1/3 x $150) 50 Adjusted income, including rentals $785 Interest expense $ 60 1/3 of operating lease payments 50 $110 Fixed Charge Coverage = $785 =
3、 7.14 times per year $110PROBLEM 73 Recurring Earnings, Excluding Interest Expense, Tax Expense, Equity Earning, a. Times Interest Earned = and Minority Earnings_ Interest Expense, Including Capitalized Interest Income before income taxes and extraordinary charges $36 Plus interest 16 (1) Adjusted i
4、ncome 52 (2) Interest expense $16 Times Interest Earned: (1) divided by (2) = 3.25 times per year Recurring Earnings, Excluding Interest Expense, Tax Expense, Equity Earnings, and Minority Earnings + Interest Portionb. Fixed Charge Coverage = Of Rentals_ Interest Expense, Including Capitalized Inter
5、est + Interest Portion Of Rentals Adjusted income (part a) $ 52 (1/3 x $60) 20 (l) Adjusted income, including rentals $72 Interest expense $16 1/3 of operating lease payments 20 (2) Adjusted interest expense $36 Fixed charge coverage: (1) divided by (2) = 2.00 times per yearPROBLEM 74a. Debt Ratio =
6、 b. Debt/Equity Ratio = c. Ratio of Total Debt to Tangible Net Worth = Total Liabilities = $174,979 = $174,979 = 70.9% Tangible Net Worth $249,222 $2,324 $246,898d. Kaufman Company has financed over 41% of its assets by the use of funds from outside creditors. The Debt/Equity Ratio and the Debt to T
7、angible Net Worth Ratio are over 70%. Whether these ratios are reasonable depends upon the stability of earnings.PROBLEM 7-5RatioTransactionTimesInterestEarnedDebtDebt/EquityTotal Debt/TangibleNet Wortha. Purchase of buildings financed by mortgageb. Purchase inventory on short-term loanc. Declaratio
8、n and payment of cash dividendd. Declaration and payment of stock dividende. Firm increases profits by cutting cost of salesf. Appropriation of retained earningsg. Sale of common stockh. Repayment of long-term bank loani. Conversion of bonds to common stock j. Sale of inventory at greater than cost-
9、+PROBLEM 76a. Times Interest Earned:Times interest earned relates earnings before interest expense, tax, minority earnings, and equity income to interest expense. The higher this ratio, the better the interest coverage. The times interest earned has improved materially in strengthening the longterm
10、debt position. Considering that the debt ratio and the debt to tangible net worth have remained fairly constant, the probable reason for the improvement is an increase in profits.The times interest earned only indicates the interest coverage. It is limited in that it does not consider other possible
11、 fixed charges, and it does not indicate the proportion of the firms resources that have come from debt.Debt Ratio:The debt ratio relates the total liabilities to the total assets.The lower this ratio, the lower the proportion of assets that have been financed by creditors.For Arodex Company, this r
12、atio has been steady for the past three years. This ratio indicates that about 40% of the total assets have been financed by creditors. For most firms, a 40% debt ratio would be considered to be reasonable.The debt ratio is limited in that it relates liabilities to the book value of total assets. Ma
13、ny assets would have a value greater than book value. This tends to overstate the debt ratio and, therefore, usually results in a conservative ratio. The debt ratio does not consider immediate profitability and, therefore, can be misleading as to the firms ability to handle longterm debt.Debt to Tan
14、gible Net Worth:The debt to tangible net worth relates total liabilities to shareholders equity less intangible assets. The lower this ratio, the lower the proportion of tangible assets that has been financed by creditors.Arodex Company has had a stable ratio of approximately 81% for the past three years. Thi
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