The 2016 balance sheet for Hallbrook INDUSTRIES, INC. is shown below :

Balance Sheet

December 31, 2016

($ in 000s)

Assets
Cash $370
Short term investments $320
Accounts receivable $370
Property, plant, and equipment (net) 2,700
Total assets $4,100
Liabilities and Shareholders' Equity
Current liabilities $ 570
Long term liabilities 520
Paid-in capital 1,600
Retained earnings 1,410
Total liabilities and shareholders' equity $4,100
The company's 2016 income statement reported the following amounts ($ in 000s)

Net sales 6,300
Interest expense 50
Income tax expense 160
Net income 330
1. Calculate the current ratio. (Round your answer to 2 decimal places)

Current Ratio 2. Calculate the acid-test ratio. (Round your answer to 2 decimal places.)

Acid-test ratio
3. Calculate the debt-equity ratio

debt-equity ratio
4. Calculate the times interest earned ratio. (Round your answer to 1 decimal place.)

times interest earned ratio _times

1. Current Asset Ratio = 1.86 : 1

 2. Acid Test Ratio= 1.86 : 1

 3. Debt to Equity ratio = 0.36 : 1

 4. Times interest earned = 10.8

Explanation:

1. Current Asset Ratio = Current Asset    

                                       Current Liabilities

                                      =  $370,000 + $370,000 + $320,000

                                                          $570,000

                                    =  $1,060,000

                                        $570,000

                                    = 1.86

Current asset includes cash, short term investment and account receivable.

2.    Acid Test Ratio  = Current Asset - Inventory

                                      Current Liabilities

                                   = $1,060,000 - $0

                                      $570,000

                                    = 1.86

No inventory value is given, so the value is deemed zero.

3.       Debt to Equity   =   Total liabilities

                                          Shareholder`s equity

                                     =   $570,000+ $520,000

                                          $1,600,000 + $1,410,000

                                    =  $1,090,000

                                        $3,010,000

Both current and long term liabilities are taken as debt since the question does not provide information in regard of specific composition of current liabilities.

                                     = 0.36

4.      Times interest earned   = Income before Interest and Tax

                                                     Interest payable

                                                    =   $330,000+ $50,000 + $160,000

                                                                     $50,000

                                                    = 10.8

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