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Income Statement 2017 Sales Cost of Goods Sold Depreciation Expense Gross Profit Selling and Administrative Expenses EBIT Interest Expense Income before Tax Taxes Net Income $9,300,000 5,750,000 550,000 $3,000,000 2,200,000 $ 800,000 200,000 $ 600,000 375,000 $ 225,000 Flathead Lake Manufacturing Comparative Balance Sheets 2017 2016 Cash $ 50,000 $ 40,000 Accounts Receivable 570,000 600,000 Inventory 530,000 460,000 Total Current Assets $1,150,000 $1,100,000 Fixed Assets 2,050,000 1,400,000 Total Assets $3,200,000 $2,500,000 Accounts Payable $ 320,000 $ 300,000 Bank Loans 480,000 400,000 Total Current Liabilities $ 800,000 $ 700,000 Long-term Bonds 1,500,000 1,000,000 Total Liabilities $2,300,000 $1,700,000 Common Stock (200,000 shares) 200,000 200,000 Retainded Earnings 700,000 600,000 Total Equity $ 900,000 $ 800,000 Total Liabilities and Equity $3,200,000 $2,500,000 Note: The common shares are trading in the stock market for $15 per share. Refer to the financial statements of Flathead Lake Manufacturing Company. The firm's compound leverage ratio is (Please keep in mind that when a ratio involves both income statement and balance sheet numbers, the balance sheet numbers for the beginning and end of the year must be averaged.) Multiple Choice 1.5 2 2.5 3

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