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borteleto borteleto
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Posts: 2477
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5 years ago
a.Using the financial statements for GMT Enterprises for 2010 (given below), calculate the return on equity, the debt ratio, and the times interest earned ratio.
b.Suppose the industry average debt ratio is 50%. Give one reason why the debt ratio for GMT Enterprises may be considered favorable, and give one reason why the debt ratio for GMT Enterprises may be considered unfavorable.

GMT Enterprises
2010 Financial Statements

Income Statement ($)

Sales10,000
Operating expenses8,200
EBIT1,800
Interest expense100
EBT1,700
Taxes (40%)680
Net income1,020

Balance Sheet ($)

Current assets1,500
Fixed assets4,000
Total assets5,500

Accounts payable900
Accruals600
Long-term debt400
Common stock2,100
Retained earnings1,500
Total liabilities & equity5,500
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DeanaRayDeanaRay
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5 years ago
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borteleto Author
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#2
5 years ago
White Heavy Checkmark Correct!
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