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Exercise 13-9 (Static) Analyzing risk and capital structure LO P3 [Alternate Version]
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[The following information applies to the questions displayed below.]
Simon Companys year-end balance sheets follow.
| At December 31 | Current Year | 1 Year Ago | 2 Years Ago |
| Assets | | | |
| Cash | $ 31,800 | $ 35,625 | $ 37,800 |
| Accounts receivable, net | 89,500 | 62,500 | 50,200 |
| Merchandise inventory | 112,500 | 82,500 | 54,000 |
| Prepaid expenses | 10,700 | 9,375 | 5,000 |
| Plant assets, net | 278,500 | 255,000 | 230,500 |
| Total assets | $ 523,000 | $ 445,000 | $ 377,500 |
| Liabilities and Equity | | | |
| Accounts payable | $ 129,900 | $ 75,250 | $ 51,250 |
| Long-term notes payable | 98,500 | 101,500 | 83,500 |
| Common stock, $10 par value | 163,500 | 163,500 | 163,500 |
| Retained earnings | 131,100 | 104,750 | 79,250 |
| Total liabilities and equity | $ 523,000 | $ 445,000 | $ 377,500 |
The companys income statements for the current year and one year ago, follow.
| For Year Ended December 31 | Current Year | 1 Year Ago |
| Sales | | $ 673,500 | | $ 532,000 |
| Cost of goods sold | $ 411,225 | | $ 345,500 | |
| Other operating expenses | 209,550 | | 134,980 | |
| Interest expense | 12,100 | | 13,300 | |
| Income tax expense | 9,525 | | 8,845 | |
| Total costs and expenses | | 642,400 | | 502,625 |
| Net income | | $ 31,100 | | $ 29,375 |
| Earnings per share | | $ 1.90 | | $ 1.80 |
Exercise 13-9 (Static) Part 3 [Alternate Version]
(3-a) Compute times interest earned for the current year and one year ago.
(3-b) Based on times interest earned, is the company more or less risky for creditors in the Current Year versus 1 Year Ago?
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