Explanation:
The business market is constantly changing, currently we are dealing with a technological revolution that directly affects the lives of people and companies. The market is increasingly competitive and globalized, so adapting to new processes and innovations with regard to technology, administrative practices and communication are essential when it comes to managing companies.
A good leader must understand that currently companies are increasingly responsible for their micro and macro environment, which configures them as active agents for positive change in the world. Therefore, the ideal is that managers consider adopting current practices that use modern communication and intelligence systems to make work easier and more agile, in addition to promoting continuous improvement in all organizational processes, avoiding waste and negative impacts on the environment, establishing social programs and environmental protection practices, in order to attest its value to stakeholders.
It is also necessary that the company be ethical with its employees, respect the individual values of each with regard to culture, gender, etc., promoting an environment and organizational culture focused on inclusion and respect for differences.
The ideal is also to have an assertive leadership, where the leader is the personal incentive agent, adopting positive attitudes about its collaborators and helping in the personal and professional development, generating an innovative, ethical and positive environment.
On November 15, a builder in a signed writing contracted with a homeowner, for an agreed price, to personally remodel the homeowner's kitchen according to specifications provided by the homeowner, and to start work on December 1. The builder agreed to provide all materials for the job in addition to all of the labor required. On November 26, the homeowner, without legal excuse, repudiated the contract. Notwithstanding the homeowner's repudiation, however, the builder subsequently purchased for $5,000 materials that could only be used in remodeling the homeowner's kitchen and promptly notified the homeowner, "I will hold you to our contract." If allowed to perform, the builder would have made a profit of $3,000 on the job. If the homeowner refuses to retract his repudiation, and the builder sues him for damages, what is the maximum that the builder is entitled to recover
Answer:
the builder could recover up to $3,000 which was his expected profit form the job.
Explanation:
In contract law, this is referred to as expectation damages. When one party breaches a contract, the non-breaching party is allowed to sue and recover the amount that he/she expected to win or gain with the transaction. In this case, the builder expected to earn a $3,000 profit, therefore, he can sue to recover the $3,000 of lost expected profits.
Using personal computers in auditing may affect the methods used to review the work of staff assistants because
Answer:
Audit documentation may not contain readily observable details of calculations.
Explanation:
This is because unlike paper based working documentation which tend to details each of the cost or expenses and profits made, utilizing personal computers in auditing may influence the techniques used to review the work of staff assistants because oftentimes using audit documentation may not comprise readily noticeable elements of calculations.
Hence, in this case, the correct answer is: Audit documentation may not contain readily observable details of calculations.
Personal computers in auditing can have an effect on the methods used because audit documentation may not contain readily observable details of calculations.
What is auditing?Auditing simply means an on-site verification activity like the inspection of a process or quality system, in order to ensure compliance to requirements.
The purpose of an audit is simply to form a view on whether the information that are presented in the financial report reflects the financial position of the organisation at a particular date.
Audit documentation simply means the principal record of auditing procedures applied, the evidence obtained, and conclusions that are reached by the auditor in the engagement.
In this case, the use of personal computers in auditing may affect the methods that are used to review the work of staff assistants.
In conclusion, the type, and content of audit documentation are matters of the professional judgement of the auditor.
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The following information is available for Fuller Manufacturing Company for the month ending October 31:__________.
Cost of direct materials used in production $1,323,600
Direct labor 1,680,000
Work in process inventory, October 1 455,300
Work in process inventory, October 31 378,100
Total factory overhead 3,544,200
Determine Fuller Manufacturing's cost of goods manufactured for the month ended October 31.
Answer:
Fuller Manufacturing's cost of goods manufactured for the month ended October 31 is $6,625,000.
Explanation:
Prepare a Cost of Goods Manufactured Schedule as follows :
Direct Materials $1,323,600
Direct labor $1,680,000
Total factory overhead $3,544,200
Add Opening Work in process inventory $455,300
Less Closing Work in process inventory ($378,100)
Cost of Goods Manufactured $6,625,000
Assuming a customer claim will be granted, what type of response will allow the company to build a better relationship with the customer
Answer: direct
Explanation:
Assuming a customer claim will be granted, a direct response will allow the company to build a better relationship with the customer.
Direct response marketing is a form of sales technique that is utilized in order to give a reponse on-the-spot. This usually allows prospective customer take instant actions based on the offer by the advertiser. This response sees measurable results instantly.
Carver Company manufactures a component used in the production of one of its main products. The following cost information isavailable:
Direct materials: $410
Direct labor (variable): $110
Variable manufacturing overhead: $90
Fixed manufacturing overhead: $30
A supplier has offered to sell the component to Carver for $650 a unit. If Carver buys the component from the supplier, the released facilities can be used to manufacture a product that would generate a contribution margin of $20,000 annually. Assuming that Carver needs 3,000 components annually and that the fixed manufacturing overhead is unavoidable, what would be the impact on operating income if Carver outsources?
A. Operating income would decrease by $100,000
B. Operating income would incrase by $120,000
C. Operating income would decrease by $20,000
D. Operating income would increase by $20,000
Answer:
A. Operating income would decrease by $100,000
Explanation:
The computation is shown below:
(Amount in dollars, commas)
Particulars Per unit 3000 units
Make Buy Make Buy
Direct materials 410 1230000
Direct labor 110 330000
Variable
manufacturing
overhead 90 270000
Opportunity cost 20000
Purchase cost 650 1950000
Total cost 1850000 1950000
As we can see that the operating income is decreased by $100,000
The horizontal aggregation of the individual labor supply curves for workers in a given location is known as the
Answer:
market supply of labor
Explanation:
The description provided is for a term known as the market supply of labor. In the context of economics, this term refers to the number of individual workers of a specific trait and with a specific skill level who supply their labor for varied prices. When dividing this by type of work it is the horizontal summation of the individuals' labor supply curves as can be seen in the graph shown attached.
According to the Ending Inventory Report, how would you calculate the cost of Sales? Ending Inventory Report Administrative Salaries $ 100,000Amortization Expense $ 20,000 Beginning Inventory $ 75,000 Ending Inventory $ 60,000Office Supplies Expense $ 25,000 Purchases $ 125,000Travel & Entertainment Expense $ 5,000 A) 575,000 + 125,000 - 560,000 B) 5125,000 - 520,000 C) 575,000 + 125,000 - 560,000 + 520,000 D) 575,000 - 560,000 E) 575,000 + 125,000 - 560,000 - 520,000
Answer:
A. $575,000 + $125,000 - $560,000
Explanation:
According to the ending inventory report, cost of sales would be calculated as follow;
Cost of sales = Beginning inventory + Purchase - Ending inventory
Cost of sales = $575,000 + $125,000 - $560,000
Based on the costs incurred by the business, the cost of sales can be calculated to be A) $75,000 + 125,000 - $60,000
Cost of sales is found by:
= Beginning inventory + Purchases - Ending inventory
In the above:
Beginning inventory = $75,000Purchases = $125,000Ending inventory = $60,000Cost of sales is therefore:
= 75,000 + 125,000 - 60,000
In conclusion, option A is correct
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A company wants to host a publicity available server that performs the following functions:
Evaluates MX record lookup
Can perform authenticated requests for A and AAA records
Uses RRSIG
Which of the following should the company use to fulfill the above requirements?
A. LDAPS
B. DNSSEC
C. SFTP
D. nslookup
E. dig
Answer: b. DNSSEC
Explanation:
From the question, we are informed that company wants to host a publicity available server that performs the following functions such as evaluates MX record lookup, can perform authenticated requests for A and AAA records, uses RRSIG.
To fulfill the above requirements, the company should use Domain Name System Security Extensions (DNSSEC). It should be ited that DNSSEC is simply an suite used for securing some information that have been provided by
the DNS.
You are twenty years old and are considering depositing $1,500 into a savings account that will pay 6% annually. When you cash out your account at age 65, how much of it will be compound interest
Answer:
$20,646.92
Explanation:
We are to calculate the future value of the amount :
The formula for calculating future value:
FV = P (1 + r)^n
FV = Future value
P = Present value
R = interest rate
N = number of years = 65 - 20 = 45
$1500(1.06)^45 = $20,646.92
TRUE OR FALSE 35. Starting to invest early for retirement increases the benefits of compound interest
Answer:
False
Explanation:
Starting to invest early for retirement reduces the benefits of compound interest
Bestway, Inc. had credit sales of $142,000 for the period. The balance in Allowance for Doubtful Accounts is a debit of $643. If Bestway estimates that 2% of credit sales will be uncollectible, what is the required journal entry to record estimated uncollectible accounts?
Answer:
See journal entry below
Explanation:
Uncollectible accounts are portion of the accounts receivable of a business from its various customers which have become uncollectible by the owners of business due to reasons such as inability to pay up debt by the customers, delay in paying up debt etc.
The journal entry to record the estimated uncollected accounts is seen below;
Bad debt expense Dr $2,840
To allowance for uncollectible A/cs Cr.
( 2% × 142,000 ). $2,840
Sea and Sand has a maximum 14 feet of front shelf space to devote to the four beverages combined. Tommy wants to use a minimum of two feet and a maximum of seven feet of front shelf space for each beverage. The contribution margin per case for Limeade is:
Answer:
$5.40
Explanation:
Calculation for the contribution margin per case for Limeade
First step is to find the Variable cost per case of Limeade using this formula
Variable cost per case of Limeade = Variable manufacturing cost per case + Variable selling cost per case
Variable cost per case of Limeade= 12.20 + 4
Variable cost per case of Limeade= $16.20
Now let calculate for Contribution margin per case for Limeade using the formula
Contribution margin per case for Limeade = Selling price per case of Limeade - Variable cost per case of Limeade
Contribution margin per case for Limeade= 21.60 - 16.20
Contribution margin per case for Limeade= $5.40
Therefore the Contribution margin per case for Limeade will be $5.40
Organizational development would be most useful to this organization in terms of________.
a. re-vitalizing organizations.
b. adapting to mergers.
c. reinforcing innovation.
d. encouraging creativity.
e. promotion reactive charge.
Answer: Option A -- re-vitalizing organizations
Explanation:
Organizational development can be defined as the study of how the changes and processes (both critical and scientific based processes), which help the organization in capacity building are developing, improving and eventually successful. Therefore, Organizational development would be most useful to this organization in term of_re-vitalizing organizations_____.
Miracle Green Corporation operates two garden supply stores: A and B. The following information relates to store A: Sales revenue $ 810,000 Variable operating expenses 319,000 Fixed expenses: Traceable to A and controllable by A 230,000 Traceable to A and controllable by others 111,000 A's segment profit margin is:
Answer:
A's segment profit margin is: $151,000
Explanation:
Calculation of A's segment profit margin
Sales revenue $ 810,000
Less Variable operating expenses ($319,000)
Controllable Contribution $491,000
Less Fixed expenses:
Traceable to A and controllable by A ($230,000)
Traceable to A and controllable by others ($111,000)
Profit Margin $151,000
"Suppose the government guarantees the price of carbon. At this price, the payoff after 1 year is $120,190 for sure. What is the opportunity cost of capital for this investment?"
Answer: a. U.S. Treasuries with 1 year to maturity
Explanation:
The Government guaranteed the price of the carbon and the payoff is to be one year later.
The opportunity cost will therefore be a similar Government security to the payoff term of the carbon sale which is 1 year.
The Government security with a similar payoff term is the US Treasury bill with 1 year left till maturity and this will be the opportunity cost because instead of the Government issuing and paying out that security they will instead pay for the carbon.
When comparing the perfect competition model to the real-world markets, what can you surmise that is true
Answer:
Perfect competition is only theoretical, it does not exist in the real world. Not even commodities markets like corn, soybean, oil, etc., work in a perfectly competitive way. First of all, taxes, tariffs and subsidies exist. Also, one of the conditions for perfect competition is that all buyers and sellers must have immediate access to perfect information, and that is virtually impossible.
Perfect competition markets act like benchmarks since real life markets will never be able to reach perfect allocation of resources, but some markets get really close to doing so.
On December 12, 2021, Pace Electronics received $25,200 from a customer toward a cash sale of $252,000 of diodes to be completed on January 16, 2022. What journal entries should Pace record on December 12 and January 16
Answer: Please find answers in explanation column
Explanation:
Journal to record collection of cash for deferred sales.
Date Account titles Debit Credit
Dec 12 Cash $25,200
Deferred sales revenue $25,200
Journal to record the sales revenue
Date Account titles Debit Credit
Jan 16 Cash $226,800
Deferred sales revenue $25,200
Sales Revenue $252,000
Cash received = Sales Revenue - Deferred Sales revenue
= $252,000 - $25,200= $226,800
Effective collaboration depends solely on implementing more collaborative software.
A. True
B. False
Answer:
B. False
Explanation:
This is the case because there are other strategies to achieve effective collaboration in teams rather than depending solely on implementing more collaborative software.
For example, instead of implementing new software, a manager can organize individual tasks for his employees, or even start a program of rewarding good performance among employees, etc
The general fund of ABC city acquired two police cars at the beginning of January 20X3, at a total cost of $40,000. The cars are expected to last for four years and have a $10,000 residual value. Straight-line depreciation is used.
On the statement of revenues, expenditures, and changes in fund balances prepared for the governmental funds for the year ended December 31, 20X3, the police cars will be reported as:_____.
Answer:
$0
Explanation:
The computation of the reporting of the policy cars is shown below:
As we know that the policy cars are normally recorded and recognized as an expenditure in the funds of the government
Therefore the carrying value should be zero as the expenses amount is also not mentioned in the question so zero amount should be recognized and reported
Under current U.S. copyright legislation, works produced on a for-hire basis and owned by firms enjoy monopoly protection for
Answer:
95 years starting from the date of their publication
Explanation:
The Copyright Act of 1976 (including its future amendments) is the current law that protects intellectual property in the US. It has been updated several times, the last amendment was done by Congress on March, 2020. It covers literary, dramatic, musical, and artistic works made registered by an individual or by a business. It doesn't cover new ideas, inventions or discoveries (those must be covered by patents if applicable).
Residual Income = $23000 Operating income = 49,998 Cost of Capital = 12% What is return on investment?
Answer:
Return on investment = 27.35 %
Explanation:
Below is the given information.
Residual Income = $23000
Operating income = 49,998
Cost of Capital = 12%
Now calculate the invested amount. Here, below is the calculation of the investment amount.
Invetment amount = (Operating income- Residual income) / Cost of capital
= (49998 - 23000) / 12%
= $ 224983
Now calculate the return on investment by using below formula.
The Return on investment = (operating income ÷ investment)×100
=(49998 / 224983) × 100
= 22.22 %
Return on investment = 27.35 %
The Cutting Department of Cassel Company has the following production and cost data for July. Production Costs 1. Transferred out 14,100 units. Beginning work in process $0 2. Started 5,100 units that are 60% Materials 73,920 complete as to conversion Labor 30,180 costs and 100% complete as Manufacturing overhead 21,300 to materials at July 31. Materials are entered at the beginning of the process. Conversion costs are incurred uniformly during the process. Determine the equivalent units of production for (1) materials and (2) conversion costs.
Answer:
Equivalent units of production for
1. Materials = 19,200
2. Conversion costs = 17,160
Explanation:
Please find attached solution to the above question.
The equivalent units of material and conversion costs are 19,200 and 17,160 respectively.
The equivalent units of material and conversion costs are 19,200 and 17,160 respectively.
Direct labor and overhead costs that are spent as a result of converting raw materials into finished goods are included in conversion costs. According to the definition of overhead costs, these are outlaid that cannot be directly linked to the production process but are nonetheless necessary for operations, such as the power or other services needed to keep a manufacturing facility open all day. The expenses of direct labor employed in determining prime costs are the same.
The efficiency of manufacturing processes may also be measured using conversion costs, which include overhead expenditures that are not included in prime cost estimates. Conversion costs are another tool operations managers employ to identify potential waste points in the production process.
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Which one of the following statements about strategic groups and strategic group mapping is false?
A. The hardest aspect of strategic group mapping is always figuring out which of several possible strategic group maps represents the single one best map for portraying how competing firms are positioned.
B. Part of strategic group map analysis always entails drawing conclusions about where on the map is the best place to be and why.
C. Strategic group maps reveal which companies are close competitors and which are distant competitors.
D. Prevailing competitive pressures and industry driving forces often favor some strategic groups and hurt others.
E. Profit prospects can vary from strategic group to strategic group.
Answer:
B. Part of strategic group map analysis always entails drawing conclusions about where on the map is the best place to be and why.
Explanation:
A strategic group is a classification of a companies or businesses in an industry based on their competitive strategy and business model. Variables such as their pricing, and what gives them an edge in competition are considered. Strategic group map analysis(used in identifying strategic groups) pays attention to where a business falls in strategic competition and the competitive dynamics of the industry. strategic group map analysis is not concerned with identifying the best competitive position for a business and why it should be in this position
The fact that less than half of all equity fund managers beat the market in most years indicate that the stock market is _____.
Answer: largely efficient
Explanation:
The fact that less than half of all equity fund managers beat the market in most years indicate that the stock market is largely efficient.
According to the strong-form hypothesis of the efficient market, when there is an efficient market, all the private and public information would be reflected in the prices of the stock.
The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as:
Answer:
Zero-based budgeting
Explanation:
Zero-based budgeting is a method of expenses to be incurred must be justified and approved within each new period.
It is called zero based budgeting because at the beginning of every period budgeting starts at a zero base. Needs and cost attached to every function are are analysed afresh and funds allocated accordingly.
This process does not consider previous fund allocation to the function, rather it assumes sales, production, and other operating data as though operations were being initiated for the first time.
A company has $317,000 in credit sales. The company uses the allowance method of determining uncollectible accounts expense. The allowance for doubtful accounts now has an $8,150 debit balance. If the company uses the allowance method based on 6% of credit sales, what will be the amount of the journal entry credited to allowance for uncollectible accounts
Answer: $19020
Explanation:
From the question, we are informed that a company has $317,000 in credit sales and that the company uses the allowance method of determining uncollectible accounts expense.
We are further told that the allowance for doubtful accounts now has an $8,150 debit balance and that the company uses the allowance method based on 6% of credit sales.
Thee amount of the journal entry credited to allowance for uncollectible accounts will be:
=$317000 × 6%
= $317,000 × 0.06
=$19020
Requirement 1. Prepare the statement of cash flows of Dumont Educational Supply for the year ended December 31, 2018. Use the indirect method to report cash flows from operating activities. (Use a minus sign or parentheses for amounts that result in a decrease in cash. If a box is not used in the statement leave the box empty: do not select a label or enter a zero.) Complete the statement one section at a time, beginning with the cash flows from operating activities Dumont Educational Supply Statement of Cash Flows Year Ended December 31, 2018 Cash Flows from Operating Activities: Net Income Adjustments to Reconcile Net Income to Net Cash Provided by (Used for) Operating Activities
Answer:
Dumont Educational Supply
Cash Flow Statement
For the year ended December 31, 2018
Cash flow from operating activities:
Net income $61,600
Adjustments to net income:
Depreciation expense $16,800Decrease in accounts receivables $5,900Increase in accounts payable $1,300Increase in inventory ($2,900)Decrease of accrued liabilities ($1,500) $19,600Net cash flows provided by operating activities $81,200
Cash flow from investing activities:
Purchase of equipment ($55,100)
Purchase of building ($99,000)
Net cash flows provided by investing activities ($154,100)
Cash flow from financing activities:
Issuance of common stock $106,000
Issuance of long term notes payable $50,000
Payment of cash dividends ($14,200)
Net cash flows provided by financing activities $141,800
Net cash flows $68,900
Cash balance January 1, 2018 $24,500
Cash balance December 31, 2018 $93,400
Procter & Gamble (P&G) has a paper towel and baby diaper business that both use paper products. This is an example of value created through transferring its core competency.
a) True
b) False
Answer:
a) True
Explanation:
Procter & Gamble's (P&G) paper towel and baby diaper business that both use paper products reveals them as an example of value created through transferring its core competency.
They have a corporate level diversification strategy. Such strategy is geared in order to create value. This gives them a competitive advantage over their competitors which is achieved through selection and management of a mix of businesses.
The company allocated manufacturing overhead of using a predetermined overhead rate of per machine hour. The total actual manufacturing overhead costs are _________.
Answer:
Instructions are below.
Explanation:
Giving the following information:
We weren't provided with enough information to answer, but, I can provide with an example and formulas to guide an answer.
For example:
Estimated overhead for the period= $1,500,000
Estimated machine-hours= 55,000
Actual machine-hours= 62,000
First, we need to calculate the predetermined overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 1,500,000/55,000
Predetermined manufacturing overhead rate= $27.27
Now, we can allocate overhead based on actual hours:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= 27.27*62,000
Allocated MOH= $1,690,740
Simon Company’s year-end balance sheets follow.At December 31 2017 2016 2015Assets Cash $ 36,335 $ 42,472 $ 42,524 Accounts receivable, net 107,459 73,568 56,120 Merchandise inventory 139,163 102,226 60,994 Prepaid expenses 12,179 11,377 4,773 Plant assets, net 333,281 312,096 273,889 Total assets $ 628,417 $ 541,739 $ 438,300 Liabilities and Equity Accounts payable $ 159,605 $ 89,723 $ 59,013 Long-term notes payable secured bymortgages on plant assets 120,505 123,354 94,927 Common stock, $10 par value 162,500 162,500 162,500 Retained earnings 185,807 166,162 121,860 Total liabilities and equity $ 628,417 $ 541,739 $ 438,300 The company’s income statements for the years ended December 31, 2017 and 2016, follow.For Year Ended December 31 2017 2016Sales $ 816,942 $ 644,669 Cost of goods sold $ 498,335 $ 419,035 Other operating expenses 253,252 163,101 Interest expense 13,888 14,827 Income taxes 10,620 9,670 Total costs and expenses 776,095 606,633 Net income $ 40,847 $ 38,036 Earnings per share $ 2.51 $ 2.34 Calculate the company’s long-term risk and capital structure positions at the end of 2017 and 2016 by computing the following ratios.(1) Debt and equity ratios. Debt Ratio 1 Choose Denominator: Choose Numerator: = Debt Ratio Debt ratio 2017: 2016: Equity Ratio Choose Denominator: Choose Numerator: = Equity Ratio Equity ratio 2017: 2016:(2) Debt-to-equity ratio. Debt-To-Equity Ratio 1. Choose Denominator: Choose Numerator: Debt-To-Equity Ratio Debt-to-equity ratio to 1 2017: 2016: - = = = 1 1 to 1(3) Times interest earned. Times Interest Earned 1 Choose Denominator: Choose Numerator: Times Interest Earned Times interest earned times 2017: 2016: times
Answer:
(1) Debt Ratio in 2017 = 44.57%; Debt Ratio in 2016 = 39.33%; Equity Ratio in 2017 = 55.43%; and Equity Ratio in 2016 = 60.67%.
(2) Debt-To-Equity Ratio in 2017 = 80.42%; and Debt-To-Equity Ratio in 2016 = 64.83%.
(3) Times Interest Earned in 2017 = 4.71 times; and Times Interest Earned in 2016 = 4.22 times.
Explanation:
(1) Calculation of debt and equity ratios
Debt ratio is a ratio that is used to measure the ability of a company to pay off its liabilities with its assets. Debt ratio can be calculated using the following formula:
Debt Ratio = Total Debt / Total Assets
We can then calculate as follows:
Total debt = Accounts payable + Long-term notes payable secured by mortgages on plant assets
Total debt in 2017 = $159,605 + $120,505 = $280,110
Total debt in 2016 = $89,723 + $123,354 = $213,077
Total assets in 2017 = $628,417
Total assets in 2016 = $541,739
Debt Ratio in 2017 = $280,110 / $628,417 = 0.4457, or 44.57%
Debt Ratio in 2016 = $213,077 / $541,739 = 0.3933, or 39.33%
Equity ratio is a ratio that is used to measure the amount of assets of a company that are financed by the investments of the owners of the company. Equity ratio can be calculated using the following formula:
Equity Ratio = Total Equity / Total Assets
We can then calculate as follows:
Total equity = Common stock, $10 par value + Retained earnings
Total equity in 2017 = $162,500 + $185,807 = $348,307
Total equity in 2016 = $162,500 + $166,162 = $328,662
Equity Ratio in 2017 = 0.5543, or 55.43%
Equity Ratio in 2016 = 0.6067, or 60.67%
(2) Calculation of debt-to-equity ratio.
The debt-equity ratio provides the proportion of financing of a company that is contributed by creditors and investors. Debt-equity ratio can be calculated using the following formula:
Debt-To-Equity Ratio = Total Debt / Total Equity
Using the data in part (1) above, we can then calculate as follows:
Debt-To-Equity Ratio in 2017 = $280,110 / $348,307 = 0.8042, or 80.42%
Debt-To-Equity Ratio in 2016 = $213,077 / $328,662 = 0.6483, or 64.83%
(3) Calculation of times interest earned
The times interest earned ratio is a ratio that is used to determine the proportionate amount of income that that is required to cover interest expenses. The times interest earned ratio can be calculated using the following formula:
Times Interest Earned = Earnings before interest and tax (EBIT) / Interest expenses
We can then calculate as follows:
EBIT = Sales - Cost of goods sold - Other operating expenses
EBIT in 2017 = $816,942 - $498,335 - $253,252 = $65,355
EBIT in 2016 = $644,669 - $419,035 - $163,101 = $62,533
Interest expenses in 2017 = $13,888
Interest expenses in 2016 = $14,827
Times Interest Earned in 2017 = $65,355 / $13,888 = 4.71 times
Times Interest Earned in 2016 = $62,533 / $14,827 = 4.22 times