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Business & Finance homework help. Ratio Analysis Exercises and Problems
Use the data for Tolito Treats, Inc., below, to do the assigned problems.

  1. Compute      the following earnings coverage ratios:
    1. Earnings       to fixed charges.
    2. Cash       flow to fixed charges.
    3. Earnings       coverage of preferred dividends.
  2. Analyze      and interpret the earnings coverage ratios in (A).

 
Tolito Treats, Inc. Consolidated Income Statement ($   thousands)
  Year Ending December 31, 2015
 
Sales
$20000.00
 
Undistributed Income of Less Than 50%-Owned Affiliates
$300.00
 
Total Revenue
$20,300.00
 
Cost of Goods Sold
$9,000.00
 
Selling and Administrative Expenses
$2,000.00
 
Depreciation
$600.00
 
Rental Expense
$500.00
 
Share of Minority Interest in Consolidated Income
$200.00
 
Interest Expense
$400.00
-$12,700.00
 
Income Before Taxes
$7,600.00
 
Income Taxes
 
Current
$900.00
 
Deferred
$400.00
-$1,300.00
 
Net Income
$6,300.00
 
Less Dividends
 
Common Stock
$300.00
 
Preferred Stock
$400.00
-$700.00
 
Earnings Retained for the Year
$5,600.00
Additional Information:

  1. The      following changes occurred in current assets and current liabilities for      2015:

 
Current Accounts
Increase (Decrease)
Current Accounts
Increase (Decrease)
 
Accounts Receivable
$900.00
Notes Payable to Bank
-$200.00
 
Inventories
-$800.00
Accounts Payable
$700.00
 
Dividend Payable
-$100.00

  1. The effective tax rate is      40%.
  2. Shares      of minority interests in consolidated income do not have fixed charges.
  3. Interest      expenses include:

 
Interest Incurred (Except Items Below)
$600.00
 
Amortization of Bond Premium
-$300.00
 
Interest on Capitalized Leases
$140.00
 
Interest Incurred
$440.00
 
Less Interest Capitalized
-$40.00
 
Interest Expense
$400.00

  1. Amortization      of previously capitalized interest (included in depreciation) is $60.
  2. Interest      implicit in operating lease rental payment (included in rental expense) is      $120.

Your submission should:

  • Be full      2 pages for the written portion (not including reference page which you      must include)
  • Include      the Excel spreadsheet with computations.
  • Clearly      separate your responses so your instructor knows the problems you are      answering.
  • Follow      the APA format.

Chapter 10 in Financial Statement Analysis
Archibald, G. (2018). Figuring out your balance sheet financial ratios and operating ratios. Rochester Business Journal, 34(32), 28-29.
DeAngelo, H., & Roll, R. (2016). Capital structure instability. Journal of Applied Corporate Finance, 28(4), 38–52. (To view this reading, please open the link provided and download the “PDF full text.”)
Zarb, B. J. (2018). Liquidity, solvency, and financial health: Do they have an impact on U.S. airline companies’ profit volatility? International Journal of Business, Accounting and Finance, 12(1), 42-51. (To view this reading, please open the link provided and download the “PDF full text.”)
Subramanyam, K. R. (2014). Financial statement analysis (11th ed.). New York, NY: McGraw Hill. ISBN13: 9780078110962

Business & Finance homework help

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