Figure 16-7
There were 30,000 shares of common stock outstanding throughout 2013. Dividends on common stock amounted to $21,000 and dividends on preferred stock amounted to $30,000. The market value of a share of common stock was $36 at the end of 2013. The income tax rate is 40%. The accounts receivable and inventory accounts had beginning balances of $58,500 and $101,400 respectively. Total assets at the beginning of the year were $430,500.
-Refer to Figure 16-7.
Required: Calculate the following ratios:
A. Debt ratio
B. Debt-to-equity ratio
State what information each ratio is providing to the company.

Question

Figure 16-7
   There were 30,000 shares of common stock outstanding throughout 2013. Dividends on common stock amounted to $21,000 and dividends on preferred stock amounted to $30,000. The market value of a share of common stock was $36 at the end of 2013. The income tax rate is 40%. The accounts receivable and inventory accounts had beginning balances of $58,500 and $101,400 respectively. Total assets at the beginning of the year were $430,500.
-Refer to Figure 16-7.
Required: Calculate the following ratios:
A. Debt ratio
B. Debt-to-equity ratio
State what information each ratio is providing to the company.

Quizplus · Accepted Answer

The Answer of Figure 16-7
   There were 30,000 shares of common stock outstanding throughout 2013. Dividends on common stock amounted to $21,000 and dividends on preferred stock amounted to $30,000. The market value of a share of common stock was $36 at the end of 2013. The income tax rate is 40%. The accounts receivable and inventory accounts had beginning balances of $58,500 and $101,400 respectively. Total assets at the beginning of the year were $430,500.
-Refer to Figure 16-7.
Required: Calculate the following ratios:
A. Debt ratio
B. Debt-to-equity ratio
State what information each ratio is providing to the company.

Figure 16-7 There Were 30,000 Shares of Common Stock