grammatico company has just completed its third year of operations the income statem 4519634

Grammatico Company has just completed its third year of operations. The income statement isas follows: Sales………………………………………………$ 2,460,000 Less: Cost of goods sold………………………….(1,410,000) Gross profit margin………………………………$ 1,050,000 Less: Selling and administrative expenses…………(710,000) Operating income…………………………………..$ 340,000 Less: Interest expense………………………………(140,000) Income before taxes……………………………….$ 200,000 Less: Income taxes………………………………….(68,000) Net income……………………………………….$ 132,000 Selected information from the balance sheet is as follows: Current liabilities……………………………….$1,000,000 Long-term liabilities……………………………..1,500,000 Total liabilities…………………………………..$2,500,000 Common stock…………………………………$4,000,000 Retained earnings…………………………………..750,000 Total equity…………………………………….$4,750,000 Required: 1. Compute the times-interest-earned ratio. 2. Compute the debt ratio. 3. Assume that the lower quartile, median, and upperquartile values for debt and times-interest-earned ratios in Grammatico’s industry areas follows: Times-interest-earned:……………………………..2.4, 5.4, 16.1 Debt:……………………………………………….0.3, 0.8, 2.4 How does Grammatico compare with the industrial norms? Does it have too much debt?

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