10. Debt Ratio Dave's Guitar Shop is thinking about adding an addition onto their building for more storage. Dave consults with a banker about applying for a loan. The loan officer asks for Dave's balance sheet to examine his overall debt levels. The financial statements show total assets of $100,000 and total liabilities of $25,000. Calculate the debt ratio:
10. Debt Ratio Dave's Guitar Shop is thinking about adding an addition onto their building for more storage. Dave consults with a banker about applying for a loan. The loan officer asks for Dave's balance sheet to examine his overall debt levels. The financial statements show total assets of $100,000 and total liabilities of $25,000. Calculate the debt ratio:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:10. Debt Ratio
Dave's Guitar Shop is thinking about adding an addition onto their building for more storage. Dave
consults with a banker about applying for a loan. The loan officer asks for Dave's balance sheet to
examine his overall debt levels. The financial statements show total assets of $100,000 and total
liabilities of $25,000. Calculate the debt ratio:
11. Debt to Equity Ratio
A company has $100,000 on a line of credit and a $500,000 mortgage on it's real estate. Shareholders
have invested $1,200,000 into the company for stock. Calculate the debt to equity ratio.
12. Times-Interest Earned Ratio
Tim's Tile Service is a construction company that is currently applying for a new loan to buy new
equipment. The bank asks Tim for his financial statements as they consider lending to him. The income
statement shows that he made $500,000 of income before interest expense. Tim's overall interest
expense was $50,000. Calculate Tim's times-interest earned ratio:
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