Chapter 3, Problem 3.16E

(1)

To determine

Ratio Analysis:

Ratio analysis is a tool to analyze the financial statements of a company which expresses a mathematical relationship among the items of financial statements.

To determine: The current ratio

(2)

To determine

The acid test ratio

(3)

To determine

Debt equity ratio:

Debt equity ratio is a long term solvency ratio, which expresses the relationship between own funds (shareholders’ equity) and loan funds (debt). This ratio shows the proportion of debts and shareholders’ equity to finance assets. It is calculated by dividing the total liabilities by total shareholders’ equity.

$\text{Debt to equity ratio = }\frac{\text{Total liabilities }}{\text{Shareholder's equity }}$

To determine: The debt equity ratio

(4)

To determine

Times interest earned ratio:

Times interest earned ratio indicates the relationship between earnings before interest and tax (EBIT) and interest expense. The purpose of the ratio is to know the payment of interest expense with respect to the company’s earnings.

$\text{Times interest earned ratio = }\frac{\text{Net income + Interest expense+Income tax}}{\text{Interest expense}}$

To determine: The times interest earned ratio.