Refer to the information in Exercises 1–3 and 1–5 about Mixon Company. Compare the long-term risk and capital structure positions of the company at the end of 2006 and 2005 by computing the following ratios:

(a) Total debt ratio

(b) Times interest earned. Comment on these ratio results.

In Exercises 1–3

In Exercises 1–5

Transcribed Image Text:

2005 2006 2004 $ 30,800 $ 35,625 $ 36,800 Cash .... Accounts receivable, net Merchandise inventory 88,500 111,500 62,500 82,500 9,375 49,200 53,000 4,000 Prepaid expenses .... 9,700 Plant assets, net .... 229,500 277,500 255,000 $518,000 $445,000 $372,500 Total assets Accounts payable .... Long-term notes payable secured $ 75,250 $ 49,250 $128,900 by mortgages on plant assets ...... Common stock, $10 par value Retained earnings 97,500 162,500 129,100 102,500 162,500 104,750 82,500 162,500 78,250 $518,000 $445,000 $372,500 Total liabilities and equity 2006 2005 Sales .. $672,500 $530,000 Cost of goods sold ..... Other operating expenses Interest expense $410,225 208,550 $344,500 133,980 12,300 11,100 Income taxes . 8,525 7,845 Total costs and expenses (638,400) (498,625) Net income $ 34,100 $ 31,375 Earnings per share .. $ 2.10 2$ $ 1.93