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Plumbing Products Ltd. reported the following data in

2018

(in millions):

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(Click the icon to view the financial statements.)Compute

Pare's

leverage ratio, debt ratio, and times-interest-earned ratio, and write a sentence to explain what those ratio values mean. Use year-end figures in place of averages where needed for the purpose of calculating the ratios. Would you be willing to lend

Pare

$1 million? Why or why not? (Enter all amounts in millions.)

Question content area bottom

Part 1

First, compute

Pare's

leverage ratio. Determine the formula for the leverage ratio. Then enter the amounts to calculate the leverage ratio. (Round your answer to two decimal places, X.XX.)

Average total assets	/	Average common stockholders' equity	=	Leverage ratio
$200	/	$74	=	2.70

Part 2

(Enter dollar amount to the nearest cent.)

This means that Pare has $

2.70

of

assets for every dollar of stockholders' equity

.

Part 3

Now determine the formula for the debt ratio. Then enter the amounts to calculate the debt ratio. (Round your answer to two decimal places, X.XX.)

		/		=	Debt ratio
		/		=

Data table

		2018
	Net operating revenues. . . . . . . .	$32.7
	Operating expenses. . . . . . . . . .	28.2
	Operating income. . . . . . . . . . . .	4.5
	Nonoperating items:
	Interest expense. . . . . . . .	(1.1)
	Other. . . . . . . . . . . . . . . . .	(0.1)
	Net income. . . . . . . . . . . . . . . . . .	$3.3
	Total assets. . . . . . . . . . . . . . . . .	$200.0
	Total stockholders' equity. . . . . .	74.0

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