The 2021 balance sheet for Hallbrook Industries, Inc., is shown below. HALLBROOK INDUSTRIES, INC.
Balance Sheet December 31, 2021 ($ in thousands)
Assets
Cash $ 330
Short-term investments 280
Accounts receivable 330
Inventory 360
Property, plant, and equipment (net) 2,300
Total assets $ 3,600
Liabilities and Shareholders’ Equity
Current liabilities $ 530
Long-term liabilities 480
Paid-in capital 1,400
Retained earnings 1,190
Total liabilities and shareholders’ equity $ 3,600
The company’s 2021 income statement reported the following amounts ($ in thousands):
Net sales $ 5,900
Interest expense 50
Income tax expense 120
Net income 290
Required:
1. Calculate the current ratio. (Round your answer to 2 decimal places.)
2. Calculate the acid-test ratio. (Round your answer to 3 decimal places.)
3. Calculate the debt to equity ratio. (Round your answer to 2 decimal places.)
4. Calculate the times interest earned ratio. (Round your answer to 1 decimal place.)

HALLBROOK INDUSTRIES, INC.

1. Current Ratio = Current assets/Current liabilities

= $1,300/530

= 2.45

2. Acid-test ratio = (Current assets - Inventory)/Current liabilities

= $940/530

= 1.77

3. Debt to Equity ratio = Total Liabilities/Equity

= $1,010/$2,590 * 100

= 0.39

4. Times Interest Earned = EBIT/Interest Expense

= $460/$50

= 9.2 times

Explanation:

a) Data and Calculations:

HALLBROOK INDUSTRIES, INC.

Balance Sheet December 31, 2021 ($ in thousands)

Assets

Cash                                                  $ 330

Short-term investments                      280

Accounts receivable                           330

Inventory                                             360

Total current assets                       $1,300

Property, plant, & equipment (net) 2,300

Total assets                                  $ 3,600

Liabilities and Shareholders’ Equity

Current liabilities                            $ 530

Long-term liabilities                           480

Total liabilities                                $1,010

Equity

Paid-in capital              1,400

Retained earnings       1,190

Total Equity                                 $2,590

Total liabilities and

shareholders’ equity                $ 3,600

2021 Income Statement reported the following amounts ($ in thousands):

Net sales                 $ 5,900

Interest expense            50

Income tax expense     120

Net income                  290

EBIT = $460

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