Sidell Corporation's most recent balance sheet and income statement appear below:
| Balance Sheet |
| December 31, Year 2 and Year 1 |
| (in thousands of dollars) |
| Year 2 | Year 1 |
|---|
| Assets | | |
|---|
| Current assets: | | |
|---|
| Cash | $ 180 | $ 100 |
|---|
| Accounts receivable, net | 220 | 200 |
|---|
| Inventory | 180 | 200 |
|---|
| Prepaid expenses | 20 | 20 |
|---|
| Total current assets | 600 | 520 |
|---|
| Plant and equipment, net | 660 | 720 |
|---|
| Total assets | $ 1,260 | $ 1,240 |
|---|
| Liabilities and Stockholders' Equity | | |
|---|
| Current liabilities: | | |
|---|
| Accounts payable | $ 130 | $ 130 |
|---|
| Accrued liabilities | 20 | 20 |
|---|
| Notes payable, short term | 100 | 90 |
|---|
| Total current liabilities | 250 | 240 |
|---|
| Bonds payable | 180 | 200 |
|---|
| Total liabilities | 430 | 440 |
|---|
| Stockholders' equity: | | |
|---|
| Common stock, $1 par value | 200 | 200 |
|---|
| Additional paid-in capital | 300 | 300 |
|---|
| Retained earnings | 330 | 300 |
|---|
| Total stockholders' equity | 830 | 800 |
|---|
| Total liabilities & stockholders' equity | $ 1,260 | $ 1,240 |
|---|
| Income Statement |
| For the Year Ended December 31, Year 2 |
| (in thousands of dollars) |
| Sales (all on account) | $ 1,230 |
|---|
| Cost of goods sold | 780 |
|---|
| Gross margin | 450 |
|---|
| Selling and administrative expense | 235 |
|---|
| Net operating income | 215 |
|---|
| Interest expense | 29 |
|---|
| Net income before taxes | 186 |
|---|
| Income taxes (30%) | 56 |
|---|
| Net income | $ 130 |
|---|
Required:
Compute the following for Year 2:
a. Times interest earned ratio.
b. Debt-to-equity ratio.
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