Hasbro, Inc. and Mattel, Inc. are the two largest toy companies in North America. Condensed liabilities and stockholders' equity from a recent balance sheet are shown for each company as follows (in thousands): Hasbro Mattel Liabilities: Current liabilities $2,788,000 $5,359,000 Long-term debt 1,500,800 2,127,000 Other liabilities _ 1,020,400 Total liabilities $4,288,800 $8,506,400 Shareholders' equity: Common stock $243,000 $1,094,000 Additional paid in capital 751,000 4,010,000 Retained earnings 4,670,000 4,131,000 Accumulated other comprehensive income (loss) and other equity items 54,000 (668,000) Treasury stock, at cost (2,144,000) (2,491,000) Total stockholders' equity $3,574,000 $6,076,000 Total liabilities and stockholders' equity $7,862,800 $14,582,400 The income from operations and interest expense from the income statement for both companies were as follows (in thousands): Hasbro Mattel Income from operations (before income tax) $912,800 $2,426,040 Interest expense 81,500 263,700 a. Determine the ratio of liabilities to stockholders' equity for both companies. Round to one decimal place. Hasbro, Inc. fill in the blank 1 Mattel, Inc. fill in the blank 2 b. Determine the times interest earned ratio for both companies. Round to one decimal place. Hasbro, Inc. fill in the blank 3 Mattel, Inc. fill in the blank 4 c. Hasbro, Inc. provides a slightly better margin of safety to creditors. Earnings for both companies appear adequate to make interest payments.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 14E: Hasbro, Inc. (HAS), and Mattel, Inc. (MAT), are the two largest toy companies in North America....

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Ratio of Liabilities to Stockholders' Equity and Times Interest Earned

Hasbro, Inc. and Mattel, Inc. are the two largest toy companies in North America. Condensed liabilities and stockholders' equity from a recent balance sheet are shown for each company as follows (in thousands):

	Hasbro	Mattel
Liabilities:
Current liabilities	$2,788,000		$5,359,000
Long-term debt	1,500,800		2,127,000
Other liabilities	_		1,020,400
	Total liabilities	$4,288,800		$8,506,400
Shareholders' equity:
	Common stock	$243,000		$1,094,000
	Additional paid in capital	751,000		4,010,000
	Retained earnings	4,670,000		4,131,000
	Accumulated other comprehensive
	income (loss) and other equity items	54,000		(668,000)
Treasury stock, at cost	(2,144,000)		(2,491,000)
Total stockholders' equity	$3,574,000		$6,076,000
Total liabilities and stockholders' equity	$7,862,800		$14,582,400

The income from operations and interest expense from the income statement for both companies were as follows (in thousands):

	Hasbro	Mattel
Income from operations (before income tax)	$912,800		$2,426,040
Interest expense	81,500		263,700

a. Determine the ratio of liabilities to stockholders' equity for both companies. Round to one decimal place.

Hasbro, Inc.	fill in the blank 1
Mattel, Inc.	fill in the blank 2

b. Determine the times interest earned ratio for both companies. Round to one decimal place.

Hasbro, Inc.	fill in the blank 3
Mattel, Inc.	fill in the blank 4

c. Hasbro, Inc. provides a slightly better margin of safety to creditors. Earnings for both companies appear adequate to make interest payments.

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