Answered: Interest Coverage Ratio

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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NOTE: JUST ANSWER (Interest Coverage Ratio) TO (Return on equity)

thats the only part I'm confused, Thank you!

PROFITABILITY
Solution and answer
Interpretation
Gross profit margin
Operating profit margin
Net profit margin
Interest Coverage Ratio
Return on asset
Return on equity

Transcribed Image Text:VII. Direction: Compute and interpret. The following comparative financial statements are provided by Avatar Industries. You were asked to compute the different financial ratios and provide your interpretations with regards to profitability, efficiency, liquidity and solvency of the company. Use the Answer Sheet template below to input your answer and solution. AVATAR INDUSTRIES AVATAR INDUSTRIES Comparative Statement of Financial Position For the years 2019 and 2018 Comparative Income Statement For the years 2019 and 2018 2019 2018 2019 2018 ASSETS Current Assets: Sales P200,000 P210,000 Cash & Cash Equivalent P65,000 P70,000 Sales Returns and Allowances 40,000 25,000 Accounts Receivable 40,000 35,000 Net Sales 160,000 185,000 Marketable Secuities 40,000 35,000 Cost of Goods Sold 100,000 115,625 Inventory 100,000 80,000 Gross Profit 60,000 69,375 Total Current Assets 220,000 200,000 160,000 P445,000 P380,000 245,000 Operating Expenses: Fixed Assets Selling Expenses 22,000 25,000 Total Assets General Expenses 8,000 12,000 Income from Operations 30,000 32,375 LIABILITIES Non-operating Income 6,000 2,500 Current Liabilities P110,800 P105,000 Income before Interest Expense 36,000 34,875 Interest Expense Long-term liabilities Total Liabilities 160,000 145,000 4,000 3,500 270,800 250,000 Net Income P32,000 P31,375 Owner's Equity 174,200 130,000 Total Liabilities & Equity P445,000 P380,000

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