Question

The following information pertains to Austin, Inc. and Huston Company:

Account Title		Austin				Huston
Current assets		$	65,000			$	75,000
Total assets			400,000				580,000
Current liabilities			22,750				37,500
Total liabilities			270,000				452,500
Stockholders’ equity			240,000				127,500
Interest expense			16,800				19,700
Income tax expense			33,600				29,800
Net income			80,000				82,200

Required
a-1. Compute each company’s debt-to-assets ratio, current ratio, and times interest earned (EBIT must be computed).

Compute each company’s return-on-equity ratio and return-on-assets ratio. Use EBIT instead of net income when computing the return-on-assets ratio.

Answer 1