Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 23

Ratio of liabilities to stockholders' equity and number of times interest charges are earned
The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years:

The income before income tax was $480,000 and $420,000 for the current and previous years, respectively.
a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.
b. Determine the number of times the bond interest charges are earned during the year for both years. Round to one decimal place.
c. What conclusions can be drawn from these data as to the company's ability to meet its currently maturing debts