Concept explainers
(a)
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:
Ratio of liabilities to owners’ equity of Company A
(b)
Whether the creditor’s risk of Company A has increased or decreased from December 31, 2015 to December 31, 2016.
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Chapter 1 Solutions
Bundle: Accounting, Chapters 1-13, 26th + Working Papers, Chapters 1-17 For Warren/reeve/duchac's Accounting, 26th And Financial Accounting, 14th + ... For Warren/reeve/duchac's Accounting, 26th
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