Fraction Corporation has provided the following financial data: Required:
a.What is the company's times interest earned ratio for Year 2?
b.What is the company's debt-to-equity ratio at the end of Year 2?
c.What is the company's equity multiplier at the end of Year 2?

a.Times interest earned = Earnings before interest expense and income taxes ÷ Interest expense
= $38,571 ÷ $10,000 = 3.86 (rounded)
b.Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity
= $310,000 ÷ $1,137,000 = 0.27 (rounded)
c.Equity multiplier = Average total assets* ÷ Average stockholders' equity*
= $1,438,500 ÷ $1,128,500 = 1.27 (rounded)
*Average total assets = ($1,447,000 + $1,430,000)÷ 2 = $1,438,500
**Average stockholders' equity = ($1,137,000 + $1,120,000)÷ 2 = $1,128,500