Long-Term Solvency Ratios (LO5)

Summary data from year-end financial statements of Palo Alto Company for 2012 follow.

Summary Income Statement Data SEES a's mo ota iracacr eee een ae eS $8,000,000

(Cast GiGi: Sollelnnd eee Otte b coe ran emer or Sao. $3,425,000 SIMGLOXDEMSCS Ere rte aekey te Miuere arenas ac ones oud ens oan eaeroe 625,000 AGiministrative:expeMmSCSiwic vs oc. su os ee ats Ome cee 525,000 INtCheSMeX DEN SCuremmrusntieca tsee Cir ccc 8« ross arecne uerereirs a tes 1,475,300 INC OnnertDGexMenSSmerwnrn session es carne chad core Onoca crap teemen aes Siete 50,250 6,100,550 NGI COM CMe serene Peon eht Ment rca rermtennnc diw he Gish aucune eiets $1,899,450 Summary Balance Sheet Data Casha eters ents aon talahe hatte: $ 60,000 Total liabilitiessisay yokeer e ae $600,000 NoncashtasSetstas sariencaenas = 790,000 Stockholders’ equity .......... 250,000 ihOtaltasSetSwenew. aeiaeseteenh.e oo o $850,000 Total liabilities and equity....... $850,000 Required

a. Compute the ratio of times-interest-earned. (Round computations to two decimal places.)

b. Compute the debt-to-equity ratio. LO.1