CENGAGENOWV2 FOR WARREN'S FINANCIAL & M
13th Edition
ISBN: 9781305267848
Author: Duchac
Publisher: Cengage Learning
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Chapter 1, Problem 1.8APE
(a)
To determine
Ratio of liabilities to owners’ equity:
This ratio measures the claims of creditors over claims of owners in financing the assets. A lower ratio indicates that the company has good ability to pay off the creditors’ obligations.
Formula of ratio of liabilities to owners’ equity:
To determine: Ratio of liabilities to
(b)
To determine
Whether the creditor’s risk of Company M has increased or decreased from December 31, 2015 to December 31, 2016
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Students have asked these similar questions
Ratio of liabilities to stockholders' equityThe following data were taken from Alvarado Company's balance sheet:
Dec. 31. 20Y4
Dec. 31, 20Y3
Total liabilities
$4,085,000
$2,880,000
Total stockholders' equity
4,300,000
3,600,000
a. Compute the ratio of liabilities to stockholders' equity for each year.b. Has the creditor's risk increased or decreased from December 31,2013, to December 31, 20Y4?
Comparative financial statement data of Garfield, Inc. follow:
Market price of Garfield’s common stock: $69.36 at December 31, 2018, and $38.04 at December 31, 2017.
Common shares outstanding: 14,000 on December 31, 2018 and 12,000 on December 31, 2017 and 2016.
All sales are on credit.
Compute the following ratios for 2018 and 2017:
2018
2017
a. Current ratio
b. Cash ratio
c. Times-interest-earned ratio
d. Inventory turnover
e. Gross profit percentage
f. Debt to equity ratio
g. Rate of return on common stockholders’ equity
h. Earnings per share of common stock
i. Price/earnings ratio
Decide (a) whether Garfield’s ability to pay debts and to sell inventory improved or deteriorated during 2018 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.
Use the common-size financial statements found here:
ommon-Size Balance Sheet 2016Cash and marketable securities $ 480 1.5 %Accounts receivable 6,030 18.2Inventory 9,540 28.8Total current assets $ 16,050 48.5 %Net property, plant, and equipment 17,020 51.5Total assets $33,070 100.0 %Accounts payable $ 7,150 21.6 %Short-term notes 6,850 20.7Total current liabilities $ 14,000 42.3 %Long-term liabilities 7,010 21.2Total liabilities $ 21,010 63.5 %Total common shareholders’ equity 12,060 36.5Total liabilities and shareholders’ equity $33,070 100.0 %Common-Size Income Statement 2016Revenues $ 30,000 100.0 %Cost of goods sold (20,050) 66.8Gross profit $ 9,950 33.2 %Operating expenses (7,960) 26.5Net operating income $ 1,990 6.6 %Interest expense (940) 3.1Earnings before taxes $ 1,050 3.5 %Income taxes (382) 1.3Net income $668 2.2 %
Specifically, write up a brief narrative that responds to the following questions:
a. How much cash does Patterson have on hand relative to its total…
Chapter 1 Solutions
CENGAGENOWV2 FOR WARREN'S FINANCIAL & M
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