Times interest earned ratio

1. Explain why an analyst would want to use more than one ratio that measures the same characteristic of a company, such as liquidity or profitability.

2. The market price of its stock is something that a company has very little control over. Why is it an important part of analyzing a company’s performance?

3. Explain why dividend yield measures profitability from the shareholders’ perspective rather than the company’s perspective.

Brudvik Company has total liabilities of $350,000 and total owners’ equity of $500,000. The company had net income of $66,000 after deducting interest expense of $8,000. This is a proprietorship and, as such, does not pay income tax on its net income.

Compute the return on assets and the return on owners’ equity.

What is the debt-to-equity ratio?

What is the times interest earned ratio?

 

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