The balance sheet for shaver corporation reported the following: cash, $8,500; short-term investments, $13,500; net accounts receivable, $42,000; inventories, $47,000; prepaids, $13,500; equipment, $101,000; current liabilities, $47,000; notes payable (long-term), $77,000; total stockholders’ equity, $101,500; net income, $4,020; interest expense, $5,800; income before income taxes, $7,380.

compute shaver’s debt-to-assets ratio and times interest earned ratio.

Debt/assets ratio = 0.575

TIER = 1.27 TIMES

Explanation:

The debt/asset ratio measures the proportion of debt to assets available to an organization.

The formula for calculating debt-to-assets is as follows:

Debt/assets ratio: Total Debt÷Total Assets

Lets add up total debts and total assets respectively and then divide them to get debt/assets ratio.

Total debts include, current liabilities, notes payable.

Total assets include, cash, net accounts receivable, inventories, prepaid, equipment.

Total debts = $47000+$77000

TD = $124000

Total Assets = $8500+$13500+$42000+$47000+$3500+$101000

TA = $215500

Debt/assets ratio = $124000÷$215500

Debt/assets ratio = 0.575

The interest cover/times interest earned ratio measures the number of times earnings before interest and tax covers the interest expense if they fall due.

Times interest earned ratio is calculated as follows;

Times interest earned ratio = EBIT ÷ INTEREST EXPENSE

TIER = $7380÷$5800

TIER = 1.27 TIMES

This means if interest expenses fall due the entity is able to pay them off 1.27 times.

1. Debt-to-assets ratio = Total debts/Total assets  x 100

Debt-to-assets ratio = $124,000/$225,500 x 100

Debt-to-assets ratio = 54.99%

Total debts = $47,000 + $77,000 =$124,000

Total assets = $8,500 + $13,500 + $42,000 + 47,000 +$13.500 + $101,000

Total assets = $225,500

2. Times interest earned

= Earnings before interest and tax/Interest expense

= $7,380/$5,800

= 1.3 times

Explanation:

Debt-to-assets ratio is the ratio of total debts to total assets while times interest earned is the ratio of income before interest and tax to interest expense.

the answer is account d

the correct answer is - no.

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