Using the financial statements for GMT Enterprises for 2010 (given below), calculate the return on equity, the debt ratio, and the times interest earned ratio. b. Suppose the industry average debt ratio is 50%. Give one reason why the debt ratio for GMT Enterprises may be considered favorable, and give one reason why the debt ratio for GMT Enterprises may be considered unfavorable.

GMT Enterprises 2010 Financial Statements Income Statement ($) Sales 10,000 Operating expenses 8,200 EBIT 1,800 Interest expense 100 EBT 1,700 Taxes (40%) 680 Net income 1,020 Balance Sheet ($) Current assets 1,500 Fixed assets 4,000 Total assets 5,500 Accounts payable 900 Accruals 600 Long-term debt 400 Common stock 2,100 Retained earnings 1,500 Total liabilities & equity 5,500