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Accounting

Item5

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Item 5

Item 5 16.66 points

The balance sheet for Shaver Corporation reported the following: cash, $10,500; short-term investments, $15,500; net accounts receivable, $46,000; inventories, $51,000; prepaids, $15,500; equipment, $117,000; current liabilities, $51,000; notes payable (long-term), $81,000; total stockholders equity, $123,500; net income, $4,420; interest expense, $6,600; income before income taxes, $8,580.

  1. Compute Shavers debt-to-assets ratio and times interest earned ratio. (Round your answers to 2 decimal places.)

  1. 2-a. Based on these ratios, does it appear Shaver relies mainly on debt or equity to finance its assets?

  • Debt

  • Equity

  1. 2-b. Is it probable that Shaver will be able to meet its future interest obligations?

  • Yes

  • No

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