Use the financial statements of Metro Corporation in S12-6 and S12-7.

1. Calculate the company’s debt ratio at December 31, 2018.

2. Calculate the company’s times-interest-earned ratio for 2018. For operating income, use income from operations.

3. Is Metro’s ability to pay liabilities and interest expense strong or weak? Comment on the value of each ratio calculated for questions 1 and 2.

Data from S12-6

To follow are the balance sheets for Metro Corporation and selected comparative competitor data.

Data from S12-7

The Metro 2018 income statement follows.

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A1 Metro Corporation Balance Sheets (Adapted) December 31, 2018 and 2017 Increase (Decrease) Amount 3 (Dollar amounts in millions) 4 Assets 2018 2017 Percentage Current assets: Cash and cash equivalents Short-term investments $ 230 (34) (38) 32 $ 980 48 268 $ 1,210 14 230 23.5% (70.8) (14.2) 45.7 Receivables, net Inventories Prepaid expenses and other assets 8 102 70 10 (3.3) 10.8 8.1 292 1,848 3,660 1,020 826 302 1,668 3,386 848 730 (10) 180 Total current assets 11 Property, plant, and equipment, net 12 274 172 Intangible assets Other assets 13 14 15 16 Liabilities and Stockholders' Equity 20.3 13.2 10.9% 96 $ 722 Total assets $ 7,354 $ 6,632 Current liabilities: 17 Accounts payable $ 860 66 18 $ 966 42 128 $ 106 (24) 12 12.3% (36.4) 10.3 19 Income tax payable 20 Short-term debt Other 21 22 Total current liabilities 116 68 1,110 2,970 1,096 5,176 (2.9) 8.3 22.8 2.9 66 1,202 3,648 1,128 5,978 (2) 92 678 32 Long-term debt 23 Other liabilities 24 Total liabilities Stockholders' equity: Common stock Retained earnings 25 802 15.5 26 2 1,534 (160) 1,376 $ 7,354 27 2 1,640 (186) 1,456 $ 6,632 (106) 26 (80) $ 722 (6.5) 14.0 (5.5) 10.9% 28 Accumulated other comprehensive (loss) 29 Total stockholders' equity Total liabilities and stockholders' equity 30 31 32 Company Quick (acid-test) Ratio Orleans Electric, Inc. (Utility)... O'Neil Company (Department store). 0.74 . . 0.63 Lavallee Foods Corporation (Grocery store) .. 0.66 ..........