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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
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?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 1 images

Blurred answer
Knowledge Booster
Ratio Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education