The balance sheet for Shaver Corporation reported the following: cash, $17,500; short-term investments, $22,500; net accounts...

 

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The balance sheet for Shaver Corporation reported the following: cash, $17,500; short-term investments, $22,500; net accounts receivable, $60,000, inventory, $65,000; prepaids, $22.500, equipment, $106,000; current liabilities, $65,000; notes payable (long- term), $95.000, total stockholders' equity, $133,500; net income, $5,820; interest expense, $9,400; income before income taxes. $12,780. Required: 1. Compute Shaver's debt-to-assets ratio and times interest earned ratio. 2-a. Based on these ratios, does it appear Shaver relies mainly on debt or equity to finance its assets? 2-b. Is it probable that Shaver will be able to meet its future interest obligations? The balance sheet for Shaver Corporation reported the following: cash, $17,500; short-term investments, $22,500; net accounts receivable, $60,000, inventory, $65,000; prepaids, $22.500, equipment, $106,000; current liabilities, $65,000; notes payable (long- term), $95.000, total stockholders' equity, $133,500; net income, $5,820; interest expense, $9,400; income before income taxes. $12,780. Required: 1. Compute Shaver's debt-to-assets ratio and times interest earned ratio. 2-a. Based on these ratios, does it appear Shaver relies mainly on debt or equity to finance its assets? 2-b. Is it probable that Shaver will be able to meet its future interest obligations?

Answer rating: 100% (QA)

To compute the debttoassets ratio we need to divide the total debt by the total assets In this case ... View the full answer