Kaufman Company’s balance sheet follows.
Assets
Current assets
Cash …………………………………………………………………..$ 13,445
Short-term investments—at cost (approximate market) ……………… 5,239
Trade accounts receivable, less allowance of $1,590 ………………… 88,337
Inventories—at lower of cost (average method) or market:
Finished merchandise …………………………………………………. 113,879
Work in process, raw materials, and supplies ………………………… 47,036
160,915
Prepaid expenses ……………………………………………………… 8,221
Total current assets ……………………………………………………. 276,157
Receivables, advances, and other assets ……………………………….. 4,473
Intangibles ……………………………………………………………… 2,324
Total other assets ………………………………………………………. 6,797
Property, plant, and equipment:
Land …………………………………………………………………… 5,981
Buildings ………………………………………………………………. 78,908
Machinery and equipment ……………………………………………...162,425
247,314
Less allowances for depreciation ……………………………………….106,067
Net property, plant, and equipment …………………………………….141,247
Total assets …………………………………………………………….. $424,201
Liabilities and Shareholders’ Equity
Current liabilities:
Notes payable …………………………………………………………… $ 2,817
Trade accounts payable …………………………………………………. 23,720
Pension, interest, and other accruals ……………………………………. 33,219
Taxes, other than income taxes …………………………………………. 4,736
Income taxes ……………………………………………………………. 3,409
Total current liabilities ………………………………………………….. 67,901
Long-term debt, 12% debentures ………………………………………. 86,235
Deferred income taxes ………………………………………………….. 8,768
Minority interest in subsidiaries ………………………………………… 12,075
Total liabilities …………………………………………………………..174,979
Stockholders’ equity:
Serial preferred …………………………………………………………. 9,154
Common $5.25 par value ……………………………………………… 33,540
Additional paid-in capital ……………………………………………… 3,506
Retained earnings ………………………………………………………203,712
249,912
Less cost of common shares in treasury ………………………………… 690
Total shareholders’ equity ……………………………………………….249,222
Total liabilities and shareholders’ equity ………………………………… $424,201
Required
a. Compute the debt ratio.
b. Compute the debt/equity ratio.
c. Compute the ratio of total debt to tangible net worth.
d. Comment on the amount of debt that Kaufman Company has.