Long-Term Debt-Payi

Jones Petro Company had the following financial statics for 2016:
                                                              RM
Long-term debt                                 400,000
(average rate of interest is 8%)
Interest expense                                 35,000
Net Income                                         48,000
Income tax                                          46,000
Operating income                             107,000
What is the times interest earned for 2016?

• 3.7 times
• 11.4 times
• 3.3 times
• 3.1 times

A times interest earned ratio of 0.90 to 1 means?

• that the firm will default on its interest payment 
• that net income is less than the interest expense
• that the cash flow exceeds the net income
• that the cash flow is less than the net income

 The ratio fixed charge coverage 

•  Is a cash flow indication of debt paying ability
• Is an income statement indication of debt paying ability
• Is a balance sheet indication of debt paying ability
• Will usually be higher than the times interest earned ratio

Jordan Manufacturing reports the following capital structure:
                                                              RM
Current liabilities                               100,000
Long-term debt                                 400,000
Deferred income taxes                       10,000
Preferred stock                                   80,000
Common stock                                 100,000
Premium on common stock              180,000
Retained earnings                            170,000

What is the debt ratio?

• 0.48
• 0.49
• 0.93
• 0.96

Joseph and John, Inc., had the following balance sheet results for 2008:
                                             RM (in millions)
Current liabilities                           12.6
Bonds payable                              18.6
Lease obligations                            2.7
Minority interest                               1.4
Common stock                                 8.6
Retained earnings                          22.9
                                                   
Compute the debt-equity ratio.

• 112.1%
• 67.6%
• 87.6%
• 46.7%

The following financial statement data are taken from Xeron Company's 2008 annual report:
                                             RM (in millions)
Current assets                              12.6
Investments                                    9.4
Intangibles                                      6.8
Tangible assets (net)                    58.1
Current liabilities                            6.4
Long-term debt                             39.7
Stockholders' equity                     40.8
Compute the debt to tangible net worth ratio.

• 146.8%
• 135.6%
• 53.0%
• 45.7%

Included in the Employee Retirement Income Security Act are the following:

• provisions requiring minimum funding of pension plans
• minimum rights to employees upon termination of their employment
• provisions requiring minimum funding of pension plans and minimum rights to employees upon termination of their employment
• provisions requiring minimum funding of pension plans, minimum rights to employees upon termination of their employment, and creation of the Pension Benefit Guaranty Corporation

If a firm has substantial capital or financing leases disclosed in the notes but not capitalized in the financial statements, then:

• the times interest earned ratio will be overstated, based upon the financial statements
• the fixed charge ratio will be overstated, based upon the financial statements
• the debt ratio will be understated
• the working capital will be understated

Which of the following statements is not true relating to a defined contribution pension plan?

• A defined contribution plan defines the contributions of the company to the pension plan.
• Once the defined contribution is paid, the company has no further obligation to the pension plan.
• There is no problem estimating the company's pension expense.
• This type of plan presents substantial problems in estimating the pension liability.

In computing debt to tangible net worth, which of the following is not subtracted in the denominator?

• copyrights
• goodwill
• patents
• investments