Calculate the 2017 debt-to-capital and times-interest earned ratios.

 How does Leon compare with the industry with respect to financial leverage?

 What can you conclude from these ratios?

Assets	2017E	2016	2015
Cash	$85,632	$7,282	$57,600
Accounts receivable	878,000	632,160	351,200
Inventories	1,716,480	1,287,360	715,200
Total current assets	$2,680,112	$1,926,802	$1,124,000
Gross fixed assets	1,197,160	1,202,950	491,000
Less accumulated depreciation	380,120	263,160	146,200
Net fixed assets	$817,040	$939,790	$344,800
Total assets	$3,497,152	$2,866,592	$1,468,800
Liabilities and Equity Accounts payable	$436,800	$524,160	145,600
Accruals	408,000	489,600	136,100
Notes payable	300,000	636,808	200,000
Total current liabilities	$1,144,800	$1,650,568	$481,600
Long-term debt	400,000	723,432	323,432
Common stock	1,721,176	460,000	460,000
Retained earnings	231,176	32,592	203,768
Total equity	$1,952,352	$492,592	$663,768
Total liabilities and equity	$3,497,152	$2,866,592	$1,468,800

Income statements

	2017E	2016	2015
Sales	$ 7,035,600	$ 6,034,000	$ 3,432,000
Cost of goods sold	5,875,992	5,528,000	2,864,000
Other expenses	550,000	519,988	358,672
Total operating costs excluding depreciation and amortization	$ 6,425,992	$ 6,047,988	$ 3,222,672	EBITDA	$ 609,608	($ 13,988)	$ 209,328
Depreciation and amortization	116,960	116,960	18,900
Interest expense	70,000	136,012	43,828
EBIT	$ 492,640	($ 130,948)	$ 190,428
Taxes (40%)	169,056 (106,784) *	58,640
Net Income	$ 253,584	$ 160,176	$ 87,960
EPS	$ 1.014	($ 1.602)	$ 0.880
DPS	$ 0.220	$ 0.110	$ 0.220
Book Value per share	$ 7.809	$ 4.926	$ 6.638
Stock Price	$ 12.17	$ 2.25	$ 8.50
Shares outstanding	250,000	100,000	100,000
Tax rate	40.00%	40.00%	40.00%
Lease payments	$ 40,000	$ 40,000	$ 40,000
Sinking fund payments	0	0	0

Answer rating: 100% (QA)

a Debt to Capital Ratio can be calculated as Current Liability Long term debt Current l... View the full answer