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The following information pertains to Austin, Inc. and Huston Company: Account Title Current assets Total assets Current Liabilities. Total Liabilities Stockholders' equity Interest expense Income tax expense Net income Debt-to-assets ratio Current ratio Times interest earned Austin $ 70,000 420,000 21,000 Austin Debt-to-assets ratio Current ratio Times interest earned Required a-1. Compute each company's debt-to-assets ratio, current ratio, and times interest earned (EBIT must be computed). (Round your "Debt-to-assets ratio" and "Times interest earned" to 1 decimal place and current ratio answers to 2 decimal places.) Return-on-equity Return-on-assets 280,000 250,000 17,000 34,000 82,000 Austin % to 1.00 times Huston $ 77,500 600,000 38,750 468,000 132,000 20,000 30,000 84,500 a-2. Which company has the greater financial risk? Huston Huston b. Compute each company's return-on-equity ratio and return-on-assets ratio. Use EBIT instead of net income when computing the return-on-assets ratio. (Round your answers to 2 decimal places.) % to 1,00 times

The following information pertains to Austin, Inc. and Huston Company: Account Title Current assets Total assets Current Liabilities. Total Liabilities Stockholders' equity Interest expense Income tax expense Net income Debt-to-assets ratio Current ratio Times interest earned Austin $ 70,000 420,000 21,000 Austin Debt-to-assets ratio Current ratio Times interest earned Required a-1. Compute each company's debt-to-assets ratio, current ratio, and times interest earned (EBIT must be computed). (Round your "Debt-to-assets ratio" and "Times interest earned" to 1 decimal place and current ratio answers to 2 decimal places.) Return-on-equity Return-on-assets 280,000 250,000 17,000 34,000 82,000 Austin % to 1.00 times Huston $ 77,500 600,000 38,750 468,000 132,000 20,000 30,000 84,500 a-2. Which company has the greater financial risk? Huston Huston b. Compute each company's return-on-equity ratio and return-on-assets ratio. Use EBIT instead of net income when computing the return-on-assets ratio. (Round your answers to 2 decimal places.) % to 1,00 times

FINANCIAL ACCOUNTING
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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The following information pertains to Austin, Inc. and Huston Company: Austin $ 70,000 420,000 21,000 Account Title Current assets Total assets Current Liabilities Total liabilities Stockholders' equity Interest expense Income tax expense Net income Debt-to-assets ratio Current ratio Times interest earned Austin Debt-to-assets ratio Current ratio Times interest earned 280,000 250,000 17,000 Return-on-equity Roturn-on-assets 34,000 82,000 Required a-1. Compute each company's debt-to-assets ratio, current ratio, and times interest earned (EBIT must be computed). (Round your "Debt-to-assets ratio" and "Times interest earned" to 1 decimal place and current ratio answers to 2 decimal places.) Austin % to 1.00 times Huston $ 77,500 600,000 38,750 468,000 132,000 20,000 Huston 30,000 84,500 a-2. Which company has the greater financial risk? Huston b. Compute each company's return-on-equity ratio and return-on-assets ratio. Use EBIT instead of net income when computing the return-on-assets ratio. (Round your answers to 2 decimal places.) % to 1.00 times
Transcribed Image Text:The following information pertains to Austin, Inc. and Huston Company: Austin $ 70,000 420,000 21,000 Account Title Current assets Total assets Current Liabilities Total liabilities Stockholders' equity Interest expense Income tax expense Net income Debt-to-assets ratio Current ratio Times interest earned Austin Debt-to-assets ratio Current ratio Times interest earned 280,000 250,000 17,000 Return-on-equity Roturn-on-assets 34,000 82,000 Required a-1. Compute each company's debt-to-assets ratio, current ratio, and times interest earned (EBIT must be computed). (Round your "Debt-to-assets ratio" and "Times interest earned" to 1 decimal place and current ratio answers to 2 decimal places.) Austin % to 1.00 times Huston $ 77,500 600,000 38,750 468,000 132,000 20,000 Huston 30,000 84,500 a-2. Which company has the greater financial risk? Huston b. Compute each company's return-on-equity ratio and return-on-assets ratio. Use EBIT instead of net income when computing the return-on-assets ratio. (Round your answers to 2 decimal places.) % to 1.00 times
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