Debt-to-equity ratio

1. Bergman Corporation has planned to have $4,000,000 in assets and $1,000,000 in liabilities at the end of the year. What is its planned debt-to-equity ratio?

2. Einstein Company currently has $800,000 owners’ equity and no long-term debt. Its expected income for 2011 is $120,000 and it is subject to a 20 percent tax rate. What is Einstein’s planned return on equity?

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In their partnership agreement, Bogie and McCall agreed that Bogie should receive a salary allowance of $40,000 per year and that McCall should receive a salary allowance of $60,000. Any remainder is allocated equally between the partners.

How much should each partner’s capital change if the partnership generates (a) net income of $102,000, (b) net income of $28,000, and (c) a net loss of $48,000?

Richard and Liz are in a partnership and have agreed to share profits and losses in a ratio of 4:6, respectively.

Determine how much their capital will increase or decrease if the partnership has (a) net income of $65,000 and (b) a net loss of $62,000.

Lindberg Company expects to earn income before interest and taxes of $600,000 during 2011. Its estimated interest expense is $40,000 and its estimated tax expense is $92,000.

What is its planned times interest earned ratio? Is it satisfactory?


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