11.4Calculate financial leverage measures The following information was available for the year ended December 31, 2016:Earnings before interest and taxes (operating income)$120,000Interest expense 20,000Income tax expense 30,000Net income 70,000Total assets at year-end 400,000Total liabilities at year-end 240,000Required:Calculate the debt ratio at December 31, 2016.Calculate the debt/equity ratio at December 31, 2016.Calculate the times interest earned for the year ended December 31, 2016.
11.4Calculate financial leverage measures The following information was available for the year ended December 31, 2016:Earnings before interest and taxes (operating income)$120,000Interest expense 20,000Income tax expense 30,000Net income 70,000Total assets at year-end 400,000Total liabilities at year-end 240,000Required:Calculate the debt ratio at December 31, 2016.Calculate the debt/equity ratio at December 31, 2016.Calculate the times interest earned for the year ended December 31, 2016.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
11.4
Calculate financial leverage measures The following information was available for the year ended December 31, 2016:
Earnings before interest and taxes (operating income)
$120,000
Interest expense 20,000
Income tax expense 30,000
Net income 70,000
Total assets at year-end 400,000
Total liabilities at year-end 240,000
Required:
Calculate the debt ratio at December 31, 2016.
Calculate the debt/equity ratio at December 31, 2016.
Calculate the times interest earned for the year ended December 31, 2016.
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