Using the income statement for J. Lo Wedding Gowns below, compute the following ratios:

a. The interest coverage.

b. The fixed charge coverage.

The total assets for this company equal $160,000. Set up the equation for the Du Pont system of ratio analysis, and compute the answer to part c below using ratio 2 b on page 59.

c. Return on assets (investment).

J. LO WEDDING GOWNS

Income Statement

Sales ..................................................................................$200,000

Less: Cost of goods sold .......................................................90,000

Gross profit .........................................................................110,000

Less: Selling and administrative expense ............................40,000

Less: Lease expense .............................................................10,000

Operating profit* ...............................................................$ 60,000

Less: Interest expense ............................................................5,000

Earnings before taxes ........................................................$ 55,000

Less: Taxes (40%) ................................................................22,000

Earnings after taxes ...........................................................$ 33,000

*Equals income before interest and taxes.