Question

In: Accounting

Tamarisk Gas Inc., an oil and gas company had the following information on its financial statements...

Tamarisk Gas Inc., an oil and gas company had the following information on its financial statements for the fiscal years ended December 31. All figures are in millions of dollars.

	2021	2020	2019	2018
Total assets	$9,510	$6,380	$2,997	$2,763
Total liabilities	5,842	2,697	2,169	1,684
Profit	1,390	461	35	285
Interest expense	109	74	58	50
Income tax expense (recovery)	603	222	(25)	178

A)

Calculate Tamarisk’s (Round answers to 1 decimal place, e.g. 52.7 or 52.7%.)

(1)		Debt to total assets ratio for 2018 through 2021
(2)		Interest coverage ratio for 2018 through 2021

2021

2020

2019

2018

(1)

Debt to total assets ratio

%

(2)

Interest coverage ratio

times

B)

Determine from the results obtained in part (a) if Tamarisk’s

(1)	Debt to total assets improved or deteriorated from 2020 to 2021	Deteriorated or Improved
(2)	Debt to total assets improved or deteriorated from 2018 to 2019	Improved or Deteriorated
(3)	Interest coverage ratio improved or deteriorated from 2020 to 2021	Deteriorated or Improved
(4)	Interest coverage ratio improved or deteriorated from 2019 to 2020	Improved or Deteriorated
(5)	Interest coverage ratio improved or deteriorated from 2018 to 2019	Deteriorated or Improved

Expert Solution


A.)

(1)	Debt to Total assets Ratio	=(Total Liabilities / Total Assets )

	Year	2021	2020	2019	2018
	Debt to Total assets Ratio	61.4%	42.3%	72.4%	60.9%

	Working	=5842/9510	=2697/6380	=2169/2997	=1684/2763

(2)	Interest Coverage ratio	= EBIT / Interest

	Year	2021	2020	2019	2018
	Interest Coverage ratio	19.3	10.2	1.2	10.3

	Working:
		2021	2020	2019	2018
	Profit	1,390	461	35	285
	Add: Income Tax Expense (recovery)	603	222	-25	178
	Add: Interest Expense	109	74	58	50
	EBIT $	2,102	757	68	513

B.)

(1 )	Debt to total assets improved or deteriorated from 2020 to 2021	Deteriorated
(2 )	Debt to total assets improved or deteriorated from 2018 to 2019	Deteriorated
(3 )	Interest coverage ratio improved or deteriorated from 2020 to 2021	Improved
(4 )	Interest coverage ratio improved or deteriorated from 2019 to 2020	Improved
(5 )	Interest coverage ratio improved or deteriorated from 2018 to 2019	Deteriorated

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