KE- Data table Industry averages Debt ratio Times interest eamed ratio Fixed-payment coverage ratio Debt analysis...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
KE- Data table Industry averages Debt ratio Times interest eamed ratio Fixed-payment coverage ratio Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested a $3,560,000 loan, to assess the firm's financial leverage and financial risk. On the basis of the debt ratios for Creek, along with the industry averages and Creek's recent financial statements, evaluate and recommend appropriate action on the loan request. Creek Enterprises Income Statement Creek Enterprises Balance Sheet: Creek Enterprises's debt ratio is 0.72 (Round to two decimal places) Creek Enterprises's times interest eamed ratio is 3.2 (Round to two decima Creek Enterprises's fixed-payment coverage ratio is 2.84 (Round to two de Creek Enterprises Income Statement for the Year Ended December 31, 2022 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling expense General and administrative expenses Lease expense Depreciation expense Total operating expense 0.45 7.48 2.11 Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate=21%) Net profits after taves Less: Preferred stock dividends Earnings available for common stockholders $3,012,000 1,750,000 183,000 1,004,000 $29.998,000 20,972,000 $9,026,000 5,949,000 $3,077,000 963,000 $2,114,000 443,940 $1,670,000 104,975 $1,565,085 MacBook Pro Data table Current assets Cash Marketable securities Accounts receivable Inventories Total current assets UFURS Gross fixed assets (at cost) Land and buildings Creek Enterprises Balance Sheet December 31, 2022 Assets Gross fixed assets Machinery and equipment Furniture and fixtures Less: Accumulated depreciation Net fixed assets $996,000 2,900,000 12.038,000 Accruals 7,502.000 $23,490,000 $11,028,000 20,495,000 7,964,000 $39,487,000 12.995,000 $26.492,000 Liabilities and Stockholders' Equity Current liabilities Accounts payable Print Notes payable Total cument liabilities Long-term debt (includes financial leases)** Stockholders' equity Preferred stock (24,700 shares, $4.25 dividend) Common stock (1.01 million shares at $5.25 par) Paid-in capital in excess of par value Retained earnings 1043 PM Total stockholders' equity Total liabilities and stockholders' equity Done $7,988,000 7,964,000 456,000 $16,408.000 $19,790,500 $2,472,000 5,302,500 Total assets $49,988,000 $49,986,000 "The firm has a 4-year lease requiring annual beginning-of-year payments of $183,000. Three years of the lease have yet to run **Required annual principal payments are $807,000. 4,005.000 2,010,000 $13,789,500 KE- Data table Industry averages Debt ratio Times interest eamed ratio Fixed-payment coverage ratio Debt analysis Springfield Bank is evaluating Creek Enterprises, which has requested a $3,560,000 loan, to assess the firm's financial leverage and financial risk. On the basis of the debt ratios for Creek, along with the industry averages and Creek's recent financial statements, evaluate and recommend appropriate action on the loan request. Creek Enterprises Income Statement Creek Enterprises Balance Sheet: Creek Enterprises's debt ratio is 0.72 (Round to two decimal places) Creek Enterprises's times interest eamed ratio is 3.2 (Round to two decima Creek Enterprises's fixed-payment coverage ratio is 2.84 (Round to two de Creek Enterprises Income Statement for the Year Ended December 31, 2022 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling expense General and administrative expenses Lease expense Depreciation expense Total operating expense 0.45 7.48 2.11 Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate=21%) Net profits after taves Less: Preferred stock dividends Earnings available for common stockholders $3,012,000 1,750,000 183,000 1,004,000 $29.998,000 20,972,000 $9,026,000 5,949,000 $3,077,000 963,000 $2,114,000 443,940 $1,670,000 104,975 $1,565,085 MacBook Pro Data table Current assets Cash Marketable securities Accounts receivable Inventories Total current assets UFURS Gross fixed assets (at cost) Land and buildings Creek Enterprises Balance Sheet December 31, 2022 Assets Gross fixed assets Machinery and equipment Furniture and fixtures Less: Accumulated depreciation Net fixed assets $996,000 2,900,000 12.038,000 Accruals 7,502.000 $23,490,000 $11,028,000 20,495,000 7,964,000 $39,487,000 12.995,000 $26.492,000 Liabilities and Stockholders' Equity Current liabilities Accounts payable Print Notes payable Total cument liabilities Long-term debt (includes financial leases)** Stockholders' equity Preferred stock (24,700 shares, $4.25 dividend) Common stock (1.01 million shares at $5.25 par) Paid-in capital in excess of par value Retained earnings 1043 PM Total stockholders' equity Total liabilities and stockholders' equity Done $7,988,000 7,964,000 456,000 $16,408.000 $19,790,500 $2,472,000 5,302,500 Total assets $49,988,000 $49,986,000 "The firm has a 4-year lease requiring annual beginning-of-year payments of $183,000. Three years of the lease have yet to run **Required annual principal payments are $807,000. 4,005.000 2,010,000 $13,789,500
Expert Answer:
Answer rating: 100% (QA)
Answer times interest earned ratio operating profit interest expen... View the full answer
Related Book For
Principles of Managerial Finance
ISBN: 978-0134476315
15th edition
Authors: Chad J. Zutter, Scott B. Smart
Posted Date:
Students also viewed these accounting questions
-
Springfield Bank is evaluating Creek Enterprises, which has requested a $4,000,000 loan, to assess the firms financial leverage and financial risk. On the basis of the debt ratios for Creek, along...
-
Springfield Bank is evaluating Creek Enterprises, which has requested a $3,540,000 loan, to assess the firm's financial leverage and financial risk. On the basis of the debt ratios for Creek, along...
-
Springfield Bank is evaluating Creek Enterprises, which has requested a $3,910,000 loan, to assess the firm's financial leverage and financial risk. On the basis of the debt ratios for Creek, along...
-
Explain the difference between an error of commission and an error of principle.
-
Smith Company completed the following transactions during 2009. The annual accounting period ends December 31, 2009. Jan. 8 Purchased merchandise for resale on account at an invoice cost of $14,860;...
-
On September 1, the balance of the Accounts Receivable control account in the general ledger of Montgomery Company was $10,960. The customers subsidiary ledger contained account balances as follows:...
-
Consider the following investments: 1. $2,000 at the end of each of the next five years at 10 percent interest compounded annually. ' 2. $12,000 at the end of each of the next eight years at 4...
-
The accounting records of Nettle Distribution show the following assets and liabilities as of December 31, 2012 and 2013. Late in December 2013, the business purchased a small office building and...
-
On January 1 of the current year, Jimmy's Sandwich Company reported total equity of $126,500. During the current year, total revenues were $103,000, while total expenses were $112,500. No other...
-
For the liquid storage system shown in Fig. E, it is desired to control liquid levels h1 and h2 by adjusting volumetric flow rates q1 and q2. Flow rate q6 is the major disturbance variable. The...
-
What data challenges facing the upstream (merchant) and downstream (retail) business units? in your answer consider the core data required to manage the supply chain and the advantages and...
-
A fuel gas consists of 7 5 % butane ( C 4 H 1 0 ) , 1 0 % propane ( C 3 H 8 ) and 1 5 % butene ( C 4 H 8 ) by volume. It is to be fed to the combustion chamber in 1 0 % excess air at 2 5 C , where it...
-
A recent annual report for Celtic Air Lines included the following note: NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Maintenance Costs We record maintenance costs related to our fleet in...
-
Fiscal year ends in December. RM in millions except per share data. 2 0 2 2 - 1 2 Assets Current assets Cash Cash and cash equivalents = 1 3 7 3 2 Short - term investments = 2 4 6 4 4 Total cash = 3...
-
Determine the average rate of return for a project that is estimated to yield total income of $460,320 over 3 years, has a cost of $964,500, and has a $131,500 residual value. Round to the nearest...
-
In normal motion, the load exerted on the hip joint is 2.5 times body weight. Calculate the corresponding stress (in MPa) on an artificial hip implant with a crosssectional area of 5.64 cm in a...
-
1.How would you describe Warren Buffet's investment philosophy and style? How has he been performing historically? 2.What factors may have caused Warren Buffet to miss out on the historic coronavirus...
-
An environmentalist wants to determine if the median amount of potassium (mg/L) in rainwater in Lincoln County, Nebraska, is different from that in the rainwater in Clarendon County, South Carolina....
-
Bennett Farm Equipment Sales Inc. is in a highly cyclical business. Although the firm has a target payout ratio of 25%, its board realizes that strict adherence to that ratio would result in a...
-
The Salem Company bond currently sells for $867.59, has a 6% coupon rate and a $1,000 par value, pays interest annually, and has 15 years to maturity. a. Calculate the yield to maturity (YTM) on this...
-
Scenario analysis Recall from P11-28 that when the market price of gold is C$1,562.50 per ounce (C$ stands for Canadian dollars) the NPV for Maritime Resources Corp.a Canadian mining firm that was...
-
How does the SEC define abusive earnings management?
-
Here is the letter written by Sherron Watkins, CPA. Is she a whistle-blower? Did she commit a discreditable act under AICPA Rule \(501 ?\) Dear Mr. Lay, Has Enron become a risky place to work? For...
-
Using the Internet, find descriptions of recent fraud schemes based on SEC releases.
Study smarter with the SolutionInn App