Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 6AP
1.
To determine
Compute the debt-to -equity ratios for Company P and Company S
2.
To determine
Comment on the results and discuss the riskiness of each Company’s financial structure.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
At the end of the current year, the following information is available for both Pulaski Company and Scott Company.
Pulaski Company
Scott Company
Total assets
$
860,000
$
440,000
Total liabilities
360,000
240,000
Total equity
500,000
200,000
Required:1. Compute the debt-to-equity ratios for both companies.2. Which company has the riskier financing structure?
Complete this question by entering your answers in the tabs below.
Required 2
Compute the debt-to-equity ratios for both companies.
Choose Numerator:
/
Choose Denominator:
/
Debt-to-Equity Ratio
Pulaski Company
/
=
Scott Company
/
=
At the end of the current year, the following information is available for both Pulaski Company and Scott Company.
Pulaski Company
Scott Company
Total assets
$
2,287,500
$
1,156,500
Total liabilities
871,500
565,500
Total equity
1,416,000
591,000
1. Compute the debt-to-equity ratios for both companies.2. Which company has the riskier financing structure?
At the end of the current year, the following information is available for both Pulaski Company and Scott Company.
Scott Company
Pulaski Company
$ 860,000
360,000
$ 440,000
240,000
500,000
200,000
Total assets
Total liabilities
Total equity
Required:
1. Compute the debt-to-equity ratios for both companies.
2. Which company has the riskier financing structure?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Compute the debt-to-equity ratios for both companies.
Pulaski Company
Scott Company
Choose Numerator: 1 Choose Denominator:
1
1
1
Debt-to-Equity Ratio
0
0
=
=
Chapter 14 Solutions
Principles of Financial Accounting.
Ch. 14 - A bond traded at 97 means that a. The bond pays...Ch. 14 - Prob. 2MCQCh. 14 - Prob. 3MCQCh. 14 - Prob. 4MCQCh. 14 - Prob. 5MCQCh. 14 - Prob. 1DQCh. 14 - Prob. 2DQCh. 14 - Prob. 3DQCh. 14 - Prob. 4DQCh. 14 - Prob. 5DQ
Ch. 14 - Prob. 6DQCh. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQCh. 14 - Prob. 11DQCh. 14 - Prob. 12DQCh. 14 - Prob. 13DQCh. 14 - Prob. 14DQCh. 14 - Prob. 15DQCh. 14 - Prob. 16DQCh. 14 - Prob. 17DQCh. 14 - Prob. 18DQCh. 14 - Prob. 19DQCh. 14 - Bond financing Identify the following as either an...Ch. 14 - Prob. 2QSCh. 14 - Prob. 3QSCh. 14 - Prob. 4QSCh. 14 - Prob. 5QSCh. 14 - Prob. 6QSCh. 14 - Prob. 7QSCh. 14 - Prob. 8QSCh. 14 - Prob. 9QSCh. 14 - Prob. 10QSCh. 14 - Prob. 11QSCh. 14 - Prob. 12QSCh. 14 - Bond features and terminology Enter the letter of...Ch. 14 - Prob. 14QSCh. 14 - Prob. 15QSCh. 14 - Prob. 16QSCh. 14 - Prob. 17QSCh. 14 - Prob. 18QSCh. 14 - Prob. 19QSCh. 14 - Prob. 20QSCh. 14 - Prob. 1ECh. 14 - Prob. 2ECh. 14 - Prob. 3ECh. 14 - Prob. 4ECh. 14 - Prob. 5ECh. 14 - Prob. 6ECh. 14 - Duval Co. issues four-year bonds with a 100,000...Ch. 14 - Prob. 8ECh. 14 - Prob. 9ECh. 14 - Prob. 10ECh. 14 - Prob. 11ECh. 14 - Prob. 12ECh. 14 - Prob. 13ECh. 14 - Prob. 14ECh. 14 - Prob. 15ECh. 14 - Prob. 16ECh. 14 - Prob. 17ECh. 14 - Prob. 18ECh. 14 - Prob. 19ECh. 14 - In each of the following separate cases, indicate...Ch. 14 - Prob. 21ECh. 14 - Prob. 22ECh. 14 - Prob. 1APCh. 14 - Prob. 2APCh. 14 - Prob. 3APCh. 14 - Prob. 4APCh. 14 - Prob. 5APCh. 14 - Prob. 6APCh. 14 - Prob. 7APCh. 14 - Prob. 8APCh. 14 - Prob. 9APCh. 14 - Prob. 10APCh. 14 - Prob. 11APCh. 14 - Refer to the lease details in Problem 14-11A....Ch. 14 - Prob. 1BPCh. 14 - Prob. 2BPCh. 14 - Prob. 3BPCh. 14 - Prob. 4BPCh. 14 - Prob. 5BPCh. 14 - Prob. 6BPCh. 14 - Prob. 7BPCh. 14 - Prob. 8BPCh. 14 - Prob. 9BPCh. 14 - Prob. 10BPCh. 14 - Prob. 11BPCh. 14 - Prob. 12BPCh. 14 - Prob. 14SPCh. 14 - Prob. 1AACh. 14 - Prob. 2AACh. 14 - Prob. 3AACh. 14 - Prob. 1BTNCh. 14 - Prob. 2BTNCh. 14 - Prob. 3BTNCh. 14 - Prob. 5BTN
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Debt Management Ratios Glow Corporation provides annual and quarterly financial data to the public. For the years of 2018 and 2019. Glows financial data included the following account balances: Required: Determine whether the debt to equity ratio is increasing or decreasing and whether Glow should be concerned.arrow_forwardAssigning a Long-Term Debt Rating Using Financial Ratios Refer to the information below from Stryker’s 2018 financial statements. Use the information to answer the requirements ($ millions). Revenue $13,601 Interest expense, gross $181 Depreciation expense 306 Dividends, including to noncontrolling interest 717 Amortization expense 417 Cash and cash equivalents 3,616 Operating profit (EBIT) 2,537 Marketable securities 83 Total debt 9,859 Average assets 24,713 Cash from operating activities 2,610 CAPEX 572 Funds from operations 2,852 a. Compute the following 10 Moody’s metrics for Stryker for 2018.Round all answers (except Revenue) to one decimal place (example for percentage ratios: 0.2345 = 23.5%). Ratio Debt / EBITDA Answer EBITA to interest expense Answer Revenue ($ millions) Answer Retained Cash Flow / Net Debt Answer EBITA margin Answer Operating margin Answer FFO / Debt Answer (FFO + Interest Expense)/Interest Expense Answer…arrow_forwardAssigning a Long-Term Debt Rating Using Financial Ratios Refer to the information below from Stryker’s 2018 financial statements. Use the information to answer the requirements ($ millions). Revenue $13,601 Interest expense, gross $181 Depreciation expense 306 Dividends, including to noncontrolling interest 717 Amortization expense 417 Cash and cash equivalents 3,616 Operating profit (EBIT) 2,537 Marketable securities 83 Total debt 9,859 Average assets 24,713 Cash from operating activities 2,610 CAPEX 572 Funds from operations 2,852 a. Compute the following 10 Moody’s metrics for Stryker for 2018.Round all answers (except Revenue) to one decimal place (example for percentage ratios: 0.2345 = 23.5%). Ratio Debt / EBITDA Answer EBITA to interest expense Answer Revenue ($ millions) Answer Retained Cash Flow / Net Debt Answer EBITA margin Answer Operating margin Answer FFO / Debt Answer (FFO + Interest Expense)/Interest Expense Answer…arrow_forward
- Compute the debt-to-equity ratio for each of the following companies. Which company appears to have a riskier financing structure? Atlanta Company Spokane Company Total liabilities $429,000 $ 549,000 Total equity 572,000 1,830,000arrow_forwardExamine the followingselected financial information for The Deal Corporation and Simple Stores, Inc., as of theend of their fiscal years ending in 2018:1. Complete the table, calculating all the requested information for the two companies. Useyear-end figures in place of averages where needed for the purpose of calculating the ratiosin this exercise. 2. Evaluate each company’s long-term debt-paying ability (strong, medium, weak)arrow_forwardThe following information is available for both Pulaski Company and Scott Company at the current year-end. Pulaski Company $ 860,000 360,000 500,000 Total assets Total liabilities Total equity Scott Company $ 440,000 Required: 1. Compute the debt-to-equity ratio for both companies. 2. Which company has the riskier financing structure? Required 1 Required 2 240,000 200,000 Complete this question by entering your answers in the tabs below. Pulaski Company Scott Company Compute the debt-to-equity ratio for both companies. Choose Numerator: / Choose Denominator: 1 1 1 Debt-to-Equity Ratio = =arrow_forward
- REQUIRED Use the information provided below to calculate the ratios for 2021 (expressed to two decimal places) that would reflect each of the following: The time taken by the company to settle its debts with trade The amount of debt that the company uses to finance its The operational effectiveness of the company before considering interest income, interest expense and company tax. The percentage of the profit that has been put back into the What investors are willing to pay for the shares of the company with due consideration given to the profit generated by each share in the company. Comment on the FIVE (5) ratios of Oslo Limited as compared to the industry average provided in the additional information. INFORMATION The information given below was extracted from the books of Oslo Limited:…arrow_forwardClayton Industries has the following account balances: Current assets Noncurrent assets The company wishes to raise $45,000 in cash and is considering two financing options: Clayton can sell $45,000 of bonds payable, or it can issue additional common stock for $45,000. To help in the decision process, Clayton's management wants to determine the effects of each alternative on its current ratio and debt-to-assets ratio. Required a-1. Compute the current ratio for Clayton's management. Note: Round your answers to 2 decimal places. Currently If bonds are issued If stock is issued $ 22,000 Current liabilities 77,880 Noncurrent liabilities stockholders' equity Currently If bonds are issued If stock is issued Current Ratio 2.44 to 1 a-2. Compute the debt-to-assets ratio for Clayton's management. Note: Round your answers to 1 decimal place. Bonds Stock to 1 to 1 Debt to Assets Ratio Additional Retained Earnings $ 9,000 50,000 48,888 % % % b. Assume that after the funds are invested, EBIT…arrow_forwardFinney Corporation has the following data as of December 31, 2018: Compute the debt to equity ratio at December 31,2018. Total Current Liabilities $36,210 Total Stockholders' Equity $ ? Total Current Assets 32,670 Other Assets 33,500 Long-term Liabilities 204,970 Property, Plant, and Equipment, Net 330,610arrow_forward
- Dear Bartleby could you please calculate the debt equity ratio for the following, thank you. Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2020 and 2019. (Round "Debt ratio" to 1 decimal place and "Debt/equity ratio" to the nearest whole percent.) Presented here are summarized data from the balance sheets and income statements of Wiper Inc.: WIPER INC. Condensed Balance Sheets December 31, 2020, 2019, 2018 (in millions) 2020 2019 2018 Current assets $ 650 $ 900 $ 700 Other assets 2,750 2,050 1,750 Total assets $ 3,400 $ 2,950 $ 2,450 Current liabilities $ 500 $ 800 $ 700 Long-term liabilities 1,500 1,000 800 Stockholders' equity 1,400 1,150 950 Total liabilities and stockholders' equity $ 3,400 $ 2,950 $ 2,450 WIPER INC. Selected Income Statement and Other Data For the year Ended December 31, 2020 and 2019 (in millions) 2020 2019 Income statement data:…arrow_forwardThe comparative accounts payable and long-term debt balances for a company follow. Line Item Description Current Year Previous Year Accounts payable $116,280 $102,000 Long-term debt 129,600 120,000 Based on this information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis? Enter all answers as positive numbers.arrow_forwardCalculating the Debt Ratio and the Debt-to-Equity Ratio Ernst Company's balance sheet shows total liabilities of $32,766,300, total stockholders' equity of $8,998,000, and total assets of $41,764,300. Required: 1. Calculate the debt ratio. Round the percentage to two decimal places.fill in the blank 1% 2. Calculate the debt-to-equity ratio. Round to two decimal places.fill in the blank 2arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License