Ratio Analysis Exercises and issues
Use the data for Tolito Treats, Inc., below, to do the assigned problems.
Compute the following earnings coverage ratios:
Earnings to fixed charges.
Cash flow to fixed charges.
Earnings coverage of preferred dividends.
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:
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
The effective tax rate is 40%.
Shares of minority interests in consolidated income do not have fixed charges.
Interest expenses include:
Interest Incurred (Except Items Below)
$600.00
Amortization of Bond Premium
-$300.00
Interest on Capitalized Leases
$140.00
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