Debt Management Ratios Financial statements for Steele Inc. follow. Steele Inc. Consolidated Income Statements (in thousands except per share amounts) 2023 2022 2021 Net sales $7,245,088 $6,944,296 $6,149,218 Cost of goods sold (5,286,253) (4,953,556) (4,355,675) Gross margin $1,958,835 $1,990,740 $1,793,543 General and administrative expenses (1,259,896) (1,202,042) (1,080,843) Special and nonrecurring items 2,617 0 0 Operating income $701,556 $788,698 $712,700 Interest expense (63,685) (62,398) (63,927) Other income 7,308 10,080 11,529 Gain on sale of investments 0 9,117 0 Income before income taxes $645,179 $745,497 $660,302 Provision for income taxes (254,000) (290,000) (257,000) Net income $391,179 $455,497 $403,302 Steele Inc. Consolidated Balance Sheets (in thousands) ASSETS Dec. 31, 2023 Dec. 31, 2022 Current assets: Cash and equivalents $320,558 $41,235 Accounts receivable 1,056,911 837,377 Inventories 733,700 803,707 Other 109,456 101,811 Total current assets $2,220,625 $1,784,130 Property and equipment, net 1,666,588 1,813,948 Other assets 247,892 248,372 Total assets $4,135,105 $3,846,450 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $250,363 $309,092 Accrued expenses 347,892 274,220 Other current liabilities 15,700 0 Income taxes 93,489 137,466 Total current liabilities $707,444 $720,778 Long-term debt 650,000 541,639 Deferred income taxes 275,101 274,844 Other long-term liabilities 61,267 41,572 Total liabilities 1,693,812 1,578,833 Stockholders’ equity: Preferred stock $100,000 $100,000 Common stock 89,727 89,727 Additional paid-in capital—common stock 128,906 127,776 Retained earnings 2,397,112 2,136,794 $2,715,745 $2,454,297 Less: Treasury stock, at cost (274,452) (186,680) Total stockholders’ equity $2,441,293 $2,267,617 Total liabilities and stockholders’ equity $4,135,105 $3,846,450 Required: 1. Compute the five debt management ratios for 2022 and 2023. Round your answers to two decimal places. 2023 2022 Times interest earned fill in the blank 1 fill in the blank 2 Debt to equity ratio fill in the blank 3 fill in the blank 4 Debt to total assets ratio fill in the blank 5 fill in the blank 6 Long-term debt to equity ratio fill in the blank 7 fill in the blank 8 Long-term debt to total assets ratio fill in the blank 9 fill in the blank 10 2. Conceptual Connection: Indicate whether the ratios have changed significantly from 2022 to 2023. Do the ratios suggest that Steele is more or less risky for long-term creditors at December 31, 2023, than at December 31, 2022?

Debt Management Ratios Financial statements for Steele Inc. follow. Steele Inc. Consolidated Income Statements (in thousands except per share amounts) 2023 2022 2021 Net sales $7,245,088 $6,944,296 $6,149,218 Cost of goods sold (5,286,253) (4,953,556) (4,355,675) Gross margin $1,958,835 $1,990,740 $1,793,543 General and administrative expenses (1,259,896) (1,202,042) (1,080,843) Special and nonrecurring items 2,617 0 0 Operating income $701,556 $788,698 $712,700 Interest expense (63,685) (62,398) (63,927) Other income 7,308 10,080 11,529 Gain on sale of investments 0 9,117 0 Income before income taxes $645,179 $745,497 $660,302 Provision for income taxes (254,000) (290,000) (257,000) Net income $391,179 $455,497 $403,302 Steele Inc. Consolidated Balance Sheets (in thousands) ASSETS Dec. 31, 2023 Dec. 31, 2022 Current assets: Cash and equivalents $320,558 $41,235 Accounts receivable 1,056,911 837,377 Inventories 733,700 803,707 Other 109,456 101,811 Total current assets $2,220,625 $1,784,130 Property and equipment, net 1,666,588 1,813,948 Other assets 247,892 248,372 Total assets $4,135,105 $3,846,450 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $250,363 $309,092 Accrued expenses 347,892 274,220 Other current liabilities 15,700 0 Income taxes 93,489 137,466 Total current liabilities $707,444 $720,778 Long-term debt 650,000 541,639 Deferred income taxes 275,101 274,844 Other long-term liabilities 61,267 41,572 Total liabilities 1,693,812 1,578,833 Stockholders’ equity: Preferred stock $100,000 $100,000 Common stock 89,727 89,727 Additional paid-in capital—common stock 128,906 127,776 Retained earnings 2,397,112 2,136,794 $2,715,745 $2,454,297 Less: Treasury stock, at cost (274,452) (186,680) Total stockholders’ equity $2,441,293 $2,267,617 Total liabilities and stockholders’ equity $4,135,105 $3,846,450 Required: 1. Compute the five debt management ratios for 2022 and 2023. Round your answers to two decimal places. 2023 2022 Times interest earned fill in the blank 1 fill in the blank 2 Debt to equity ratio fill in the blank 3 fill in the blank 4 Debt to total assets ratio fill in the blank 5 fill in the blank 6 Long-term debt to equity ratio fill in the blank 7 fill in the blank 8 Long-term debt to total assets ratio fill in the blank 9 fill in the blank 10 2. Conceptual Connection: Indicate whether the ratios have changed significantly from 2022 to 2023. Do the ratios suggest that Steele is more or less risky for long-term creditors at December 31, 2023, than at December 31, 2022?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 4PB

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Question

Debt Management Ratios

Financial statements for Steele Inc. follow.

Steele Inc.
Consolidated Income Statements
(in thousands except per share amounts)
	2023	2022	2021
Net sales	$7,245,088		$6,944,296	$6,149,218
Cost of goods sold	(5,286,253)		(4,953,556)	(4,355,675)
Gross margin	$1,958,835		$1,990,740	$1,793,543
General and administrative expenses	(1,259,896)		(1,202,042)	(1,080,843)
Special and nonrecurring items	2,617		0	0
Operating income	$701,556		$788,698	$712,700
Interest expense	(63,685)		(62,398)	(63,927)
Other income	7,308		10,080	11,529
Gain on sale of investments	0		9,117	0
Income before income taxes	$645,179		$745,497	$660,302
Provision for income taxes	(254,000)		(290,000)	(257,000)
Net income	$391,179		$455,497	$403,302

Steele Inc.
Consolidated Balance Sheets
(in thousands)
ASSETS	Dec. 31, 2023	Dec. 31, 2022
Current assets:
Cash and equivalents	$320,558		$41,235
Accounts receivable	1,056,911		837,377
Inventories	733,700		803,707
Other	109,456		101,811
Total current assets	$2,220,625		$1,784,130
Property and equipment, net	1,666,588		1,813,948
Other assets	247,892		248,372
Total assets	$4,135,105		$3,846,450
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$250,363		$309,092
Accrued expenses	347,892		274,220
Other current liabilities	15,700		0
Income taxes	93,489		137,466
Total current liabilities	$707,444		$720,778
Long-term debt	650,000		541,639
Deferred income taxes	275,101		274,844
Other long-term liabilities	61,267		41,572
Total liabilities	1,693,812		1,578,833
Stockholders’ equity:
Preferred stock	$100,000		$100,000
Common stock	89,727		89,727
Additional paid-in capital—common stock	128,906		127,776
Retained earnings	2,397,112		2,136,794
	$2,715,745		$2,454,297
Less: Treasury stock, at cost	(274,452)		(186,680)
Total stockholders’ equity	$2,441,293		$2,267,617
Total liabilities and stockholders’ equity	$4,135,105		$3,846,450

Required:

1. Compute the five debt management ratios for 2022 and 2023. Round your answers to two decimal places.

	2023	2022
Times interest earned	fill in the blank 1	fill in the blank 2
Debt to equity ratio	fill in the blank 3	fill in the blank 4
Debt to total assets ratio	fill in the blank 5	fill in the blank 6
Long-term debt to equity ratio	fill in the blank 7	fill in the blank 8
Long-term debt to total assets ratio	fill in the blank 9	fill in the blank 10

2. Conceptual Connection: Indicate whether the ratios have changed significantly from 2022 to 2023.

Do the ratios suggest that Steele is more or less risky for long-term creditors at December 31, 2023, than at December 31, 2022?

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