Chapter 14, Problem 14.14EX

a)

To determine

Ratio of liabilities to stockholders’ equity is determined by dividing liabilities and stockholders’ equity.

Formula:

$\text{Ratio of liabilities to stockholders' equity}=\frac{\text{Total liabilities}}{\text{Stockholders' equity}}$

To compute: Ratio of liabilities to stockholders’ equity 

Given info: Total liabilities and Stockholders’ equity

b)

To determine

Times interest earned ratio: Times interest earned ratio quantifies the number of times the earnings before interest and taxes can pay the interest expense. First, determine the sum of income before income tax and interest expense. Then, divide the sum by interest expense.

Formula: $\begin{array}{l}\text{Times-interest-}\\ \text{earned ratio }\end{array}\}=\frac{\text{Income before income tax}+\text{Interest expense}}{\text{Interest expense}}$

To compute: Times interest earned ratio

Given info: Income before income tax and interest expense.

c.

To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

To provide: Conclusion about company’s ability to meet its currently maturing debt.