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Question(s) / Instruction(s):

Sanderson Company’s year-end balance sheets follow.     

 At December 31                                              2012                                     2011                                      2010

Assets:                                                                                                                                

 Cash                                                                    $35,008                $40,110                $40,938 

 Accounts receivable, net                             100,458                                69,484                                 56,272 

 Merchandise inventory                                                123,781                               91,818                                  60,535 

 Prepaid expenses                                          11,497                                  10,742                                  4,689 

 Plant assets, net                                             316,731                 294,290                                263,866

 Total assets                                                      $587,475                             $506,444                             $426,300 

                                               

 Liabilities and Equity:                                                                                                                    

 Accounts payable                                          $150,670                             $88,157                $56,834 

 Long-term notes payable secured by

 Mortgages on plant assets                          111,550                                118,812                                94,212 

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

Retained earnings                                           162,755                               136,975                112,754

 Total liabilities and equity                        $587,475                             $506,444                             $426,300 

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

 For Year Ended December 31    2012                                                                                       2011

  Sales                                                   $763,718                                                                             $602,668 

  Cost of goods sold                         $465,868                                                                             $391,734

  Other operating expenses         236,753                                                                152,475

  Interest expense                          12,983                                                                                  13,861                                   

  Income taxes                                  9,928                                                                                    9,040

  Total costs and expenses           725,532                                                                               567,110

  Net income                                      $38,186                                                                               $35,558

  Earnings per share                          $2.35                                                                                  $2.19

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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