The balance sheet for Shaver Corporation reported the following: cash, $5,000; short-terminvestments, $10,000; net accounts receivable, $35,000; inventory, $40,000; prepaids, $10,000;equipment, $100,000; current liabilities, $40,000; notes payable (long-term), $70,000; total stockholders’ equity, $90,000; net income, $3,320; interest expense, $4,400; income before incometaxes, $5,280. Compute Shaver’s debt-to-assets ratio and times interest earned ratio. Based onthese ratios, does it appear Shaver relies mainly on debt or equity to finance its assets? Is it probable that Shaver will be able to meet its future interest obligations?
The balance sheet for Shaver Corporation reported the following: cash, $5,000; short-terminvestments, $10,000; net accounts receivable, $35,000; inventory, $40,000; prepaids, $10,000;equipment, $100,000; current liabilities, $40,000; notes payable (long-term), $70,000; total stockholders’ equity, $90,000; net income, $3,320; interest expense, $4,400; income before incometaxes, $5,280. Compute Shaver’s debt-to-assets ratio and times interest earned ratio. Based onthese ratios, does it appear Shaver relies mainly on debt or equity to finance its assets? Is it probable that Shaver will be able to meet its future interest obligations?
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 50E: Juroe Company provided the following income statement for last year: Juroes balance sheet as of...
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The balance sheet for Shaver Corporation reported the following: cash, $5,000; short-term
investments, $10,000; net accounts receivable, $35,000; inventory, $40,000; prepaids, $10,000;
equipment, $100,000; current liabilities, $40,000; notes payable (long-term), $70,000; total
taxes, $5,280. Compute Shaver’s debt-to-assets ratio and times interest earned ratio. Based on
these ratios, does it appear Shaver relies mainly on debt or equity to finance its assets? Is it probable that Shaver will be able to meet its future interest obligations?
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