**Problem 10-7A (Algo) Applying the debt-to-equity ratio LO A2**The following information is available for both Pulaski Company and Scott Company at the current year-end.| | Pulaski Company | Scott Company ||------------------------------------------|-----------------|----------------|| **Total assets** | $2,342,500 | $1,211,500 || **Total liabilities** | 816,500 | 510,500 || **Total equity** | 1,526,000 | 701,000 |**Required:**1. Compute the debt-to-equity ratio for both companies.2. Which company has the riskier financing structure?**Instructions:**Complete this question by entering your answers in the tables below.**Table for Calculations:**- **Pulaski Company** - Choose Numerator: Total liabilities - Choose Denominator: Total equity - Debt-to-Equity Ratio: Formula result- **Scott Company** - Choose Numerator: Total liabilities - Choose Denominator: Total equity - Debt-to-Equity Ratio: Formula resultThe detailed computation involves dividing the "Total liabilities" by the "Total equity" for each company to get their respective debt-to-equity ratios. Higher ratios indicate a riskier financing structure as more debt is used compared to equity.

Debt to equity ratio is the measure used to show the entity's total liabilities proportion to its total equity. Higher the debt equity ratio and higher will be the risk.Requirement 1) Computation of debt to equity ratio :- Debt to equity ratio Numerator / Denominator Total liabilities / Total equity = Debt to equity ratio Pulaski $816,500 / $1,526,000 = 0.54 Scott $510,500 / $701,000 = 0.73Requirement 2) Scott company has more riskier financing structure. Reason :- Higher debt to equity ratio indicates that the company is using more debt in its financing and if at any time in future, the earnings of the company is less or not capable to pay the interest or repay the debt, then it may lead to the financial distress.

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The following information is available for both Pulaski Company and Scott Company at the current year-end. Pulaski Company $ 2,342,500 816,500 1,526,000 Total assets Total liabilities Total equity Required: 1. Compute the debt-to-equity raso for both companies. 2. Which company has the riskier financing structure? Scott Company $ 1,211,500 510,500 701,000 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the debt-to-equity ratio for both companies. Pulaski Company Scott Company Choose Numerator: 1 1 1 1 Choose Denominator: Required 1 Prev Debt-to-Equity Ratio Required 2 > 1 of 1 www www www Next

The following information is available for both Pulaski Company and Scott Company at the current year-end. Pulaski Company $ 2,342,500 816,500 1,526,000 Total assets Total liabilities Total equity Required: 1. Compute the debt-to-equity raso for both companies. 2. Which company has the riskier financing structure? Scott Company $ 1,211,500 510,500 701,000 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the debt-to-equity ratio for both companies. Pulaski Company Scott Company Choose Numerator: 1 1 1 1 Choose Denominator: Required 1 Prev Debt-to-Equity Ratio Required 2 > 1 of 1 www www www Next

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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