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Question(s) / Instruction(s):

Sanderson Company’s year-end balance sheets follow.

 At December 31                              2012                                     2011                                      2010

Assets:                                                                                                                                

 Cash                                                    $27,559                $32,214                $32,560 

 Accounts receivable, net             79,069                                 57,514                                  43,413 

 Merchandise inventory                                103,472                                74,496                                 48,608 

 Prepaid expenses                           9,054                                   8,713                                    3,618 

 Plant assets, net                              252,673                                233,810                                207,401 

 Total assets                                      $471,827                             $406,747                             $335,600 

                                 

 Liabilities and Equity:                                                                                                                                   

 Accounts payable                          $113,960                             $70,115                $45,185 

 Long-term notes payable secured by

 Mortgages on plant assets          87,816                                 91,681                                  74,909 

 Common stock, $10 par value    162,500                                162,500                                162,500 

 Retained earnings                         107,551                 82,451                                 53,006 

 Total liabilities and equity         $471,827                            $406,747                             $335,600 

     

 

The company’s income statements for the years ended December 31, 2012 and 2011, follow.

 For Year Ended December 31    2012                                                                      2011

  Sales                                                   $613,375                                                              $484,029 

  Cost of goods sold                         $374,159                                                              $314,619                                             

  Other operating expenses         190,146                                                 122,459                                                

  Interest expense                          10,427                                                                   11,133                                  

  Income taxes                                  7,974                                                                     7,260

Total costs and expenses             582,706                                                                455,471

Net income                                        $30,669                                                                $28,558

Earnings per share                           $1.89                                                                   $1.76

 

Required:

Calculate the company’s long-term risk and capital structure positions at the end of 2012 and 2011 by computing the following ratios:

(1)          Debt-to-equity ratio.

(2)          Times interest earned.

 

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