Asked by Maryna chirilov on May 29, 2024
Verified
Sidell Corporation's most recent balance sheet and income statement appear below: 
Required:
Compute the following for Year 2:
a.Times interest earned ratio.
b.Debt-to-equity ratio.
Debt-to-equity Ratio
A financial benchmark indicating the proportional use of debt and equity in the financing strategy for a company's assets.
Times Interest Earned Ratio
A financial metric assessing a company's ability to meet its interest obligations from operating earnings.
- Understand and apply various financial ratios to assess a company's financial health.
- Calculate and interpret the times interest earned ratio to evaluate a company's ability to meet its debt obligations.
- Compute and assess the debt-to-equity ratio to understand a company's financial leverage.
Verified Answer
MA
Maria AnagnostopoulosMay 29, 2024
Final Answer :
a.Times interest earned = Earnings before interest expense and income taxes ÷ Interest expense
= $215 ÷ $29 = 7.41
b.Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity
= $430 ÷ $830 = 0.52
= $215 ÷ $29 = 7.41
b.Debt-to-equity ratio = Total liabilities ÷ Stockholders' equity
= $430 ÷ $830 = 0.52
Learning Objectives
- Understand and apply various financial ratios to assess a company's financial health.
- Calculate and interpret the times interest earned ratio to evaluate a company's ability to meet its debt obligations.
- Compute and assess the debt-to-equity ratio to understand a company's financial leverage.
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