15–10. (Analyzing coverage ratios) The income statements for Lowe's Companies, Inc.(LOW), spanning the period 2014–2016 (just before the housing crash, so these arerepresentative years) are as follows:201620152014Net operating income (EBIT)Interest expenseEarnings before taxesIncome taxes$4,971,000(552,000)$4,420,000(1,870,000)$2,550,000$4,792,000(516,000)$4,280,000$4,149,000(476,000)$3,670,000(1,580,000)$2,700,000(1,390,000)$2,290,000Net incomea. Calculate the times interest earned ratio for each of the years for which youhave data.b. What is your assessment of how the firm's ability to service its debt obligationshas changed over this period?c. (Optional) How does Lowe's compare to Home Depot (HD) in Study Problem15-9? Is it better able to service its debt than Home Depot? Why or why not?

Interest Earned Ration is the ratio which is calculated with the help of Operating Income which is…

15–10. (Analyzing coverage ratios) The income statements for Lowe's Companies, Inc. (LOW), spanning the period 2014–2016 (just before the housing crash, so these are representative years) are as follows: 2016 2015 2014 Net operating income (EBIT) Interest expense Earnings before taxes Income taxes Net income $4,971,000 (552,000) $4,420,000 (1,870,000) $2,550,000 $4,792,000 (516,000) $4,280,000 (1,580,000) $2,700,000 $4,149,000 (476,000) $3,670,000 (1,390,000) $2,290,000 a. Calculate the times interest earned ratio for each of the years for which you

15–10. (Analyzing coverage ratios) The income statements for Lowe's Companies, Inc. (LOW), spanning the period 2014–2016 (just before the housing crash, so these are representative years) are as follows: 2016 2015 2014 Net operating income (EBIT) Interest expense Earnings before taxes Income taxes Net income $4,971,000 (552,000) $4,420,000 (1,870,000) $2,550,000 $4,792,000 (516,000) $4,280,000 (1,580,000) $2,700,000 $4,149,000 (476,000) $3,670,000 (1,390,000) $2,290,000 a. Calculate the times interest earned ratio for each of the years for which you

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The pretax financial income (or loss) figures for Martinez Company are as follows. 2012 $148,000 2013 275,000 2014 83,000 2015 (148,000 ) 2016 (362,000 ) 2017 115,000 2018 104,000 Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2012 and 2013 and a 40% tax rate for the remaining years.Prepare the journal entries for the years 2014 to 2018 to record income tax expense and the effects of the net operating loss carrybacks and carryforwards assuming Martinez Company uses the carryback provision. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Randall Corporation reported the following revenue data:Year Net revenues (in millions)$$$$6,8007,0046,7327,2762016201720182019Use 2016 as the base year. The trend percentage in 2019 is closest toa. 93%.b. 104%.c. 107%.d. 112%
Sandhill Corporation had revenues of $858,030 in 2017. It also had expenses (excluding depreciation) of $356,240, depreciation of $103,471, and interest expense of $52,414. What was the company’s net income after taxes if its average tax rate was 40 percent? (Round answer to 2 decimal places, e.g. 15.25.)
The pretax financial income (or loss) figures for Marin Company are as follows. 2015 $161,000 2016 248,000 2017 76,000 2018 (161,000 ) 2019 (390,000 ) 2020 119,000 2021 95,000 Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 25% tax rate for 2015 and 2016 and a 20% tax rate for the remaining years.Prepare the journal entries for the years 2017 to 2021 to record income tax expense and the effects of the net operating loss carryforwards. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.)
61. Lala Company reported the following information in 2021:· Sales revenue- P500,000· Cost of Goods Sold- P350,000· Operating Expenses- P55,000· Unrealized translation gain- P20,000· Cash dividends received on investment in equity securities- P2,000Ignore income tax, for 2021, Lala Company would report total comprehensive income before tax of? CHOICES: P115,000 P20,000 P117,000 P97,000
Calculate the after-tax cost of debt (i.e., (1-tax rate)*rD Here is the condensed 2015 balance sheet for Skye Computer Company (in thousands of dollars): CONDENSED BALANCE SHEET FOR SKYE COMPUTER COMPANY FY2015 Current assets $2,000 Net fixed assets 3,000 Total assets $5,000 Total debt $2,100 Preferred stock 250 Common stock 1,300 Retained earnings 1,350 Total common equity $2,650 Total liabilities & equity $5,000 The firm's marginal tax rate is 35%. The firm's currently outstanding 10% annual coupon rate long-term debt sells at $1,051.11. The debt matures in 7 years. Coupon interest is paid semiannually. Skye's preferred stock pays a dividend of $3.30 per share, and its preferred stock sells for $30 per share. Skye's earnings per share last year were $3.20. The common stock sells for $55.00, last year’s dividend (D0) was $2.10, and a flotation cost (i.e, f ) of 10% would be required to sell…
Use the following information for Taco Swell, Inc., (assume the tax rate is 24 percent): 2017 2018 Sales $ 15,573 $ 15,336 Depreciation 1,741 1,816 Cost of goods sold 4,379 4,787 Other expenses 986 864 Interest 835 966 Cash 6,187 6,706 Accounts receivable 8,120 9,667 Short-term notes payable 1,250 1,227 Long-term debt 20,560 24,836 Net fixed assets 51,064 54,513 Accounts payable 4,512 4,884 Inventory 14,419 15,368 Dividends 1,350 1,698 Prepare a balance sheet for this company for 2017 and 2018. (Do not round intermediate calculations.) Prepare an income statement for this company for 2017 and 2018. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16. Input all answers as positive values.)
The pretax financial income (or loss) figures for Jenny Spangler Company are as follows. 2015 $160,000 2016 250,000 2017 80,000 2018 (160,000 ) 2019 (380,000 ) 2020 120,000 2021 100,000 Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 25% tax rate for 2015 and 2016 and a 20% tax rate for the remaining years.Prepare the journal entries for the years 2017 to 2021 to record income tax expense and the effects of the net operating loss carryforwards. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.)
At May 31, 2016, FedEx Corporation reported the following amounts (in millions) in its financial statements: 2016 2015 Total Assets $ 13,200 $ 12,300 Total Liabilities 8,316 7,503 Interest Expense 300 300 Income Tax Expense 480 290 Net Income 1,080 1,000 Required: 1.Compute the debt-to-assets ratio and times interest earned ratio for 2016 and 2015. (Round your answers to 2 decimal places.)
Byron Brock’s inc recently reported $13 million of net income. It’s EBIT was $20375000, and it’s tax rate was 35%. What was urs interest expense
Certain financial ratios for The Gap for its most recent year are given below, along with the average ratios for its industry. Based on those ratios, answer the following. 1) Does The Gap seem to prefer to finance its assets with debt or with equity? How can you tell? What percent of its assets are funded with debt? What percent of its assets are funded with equity? 2) A supplier to The Gap sells merchandise to The Gap and asks to be paid within 60 days. While any of The Gap’s financial ratios might be of interest to the supplier, which of the ratios listed below do you think would likely be the most important one to the supplier? Why? 3) Which of the ratios presented suggest that, compared to its industry, The Gap may have a problem controlling its operating expenses? How can you tell? Your answer should clearly indicate that you understand why the ratio that you chose answers this question. Here is the data for The Gap and its industry. Financial Ratios…
Byron Books Inc. recently reported $13 million of net income. Its EBIT was $22.1 million, and its tax rate was 35%. What was its interest expense? (Hint: Write out the headings for an income statement, and then fill in the known values. Then divide $13 million of net income by (1 - T) = 0.65 to find the pretax income. The difference between EBIT and taxable income must be interest expense. Use this same procedure to complete similar problems.) Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar, if necessary. Do not round intermediate calculations.

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