Question: The balance sheet for Shaver Corporation reported the following cash
The balance sheet for Shaver Corporation reported the following: cash, $ 5,000; short-term investments, $ 10,000; net accounts receivable, $ 35,000; inventory, $ 40,000; prepaids, $ 10,000; equipment, $ 100,000; current liabilities, $ 40,000; notes payable (long-term), $ 70,000; total stock-holders’ equity, $ 90,000; net income, $ 3,320; interest expense, $ 4,400; income before income taxes, $ 5,280. Compute Shaver’s debt-to-assets ratio and times interest earned ratio. Based on these ratios, does it appear Shaver relies mainly on debt or equity to finance its assets? Is it prob-able that Shaver will be able to meet its future interest obligations?
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