The ratio of liabilities to stockholders' equity measures how much of the company is financed by debt and equity. It is computed as follows: To illustrate, the ratio of liabilities to stockholders' equity for Lincoln Company is computed as follows                         Current Assets - Current Liabilities = Calculated Value   1. Working capital:                                      Ratio   Numerator ÷ Denominator = Calculated Value                     2. Current ratio                                    3. Quick ratio                                    4. Accounts receivable               turnover

Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 10MCQ
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The ratio of liabilities to stockholders' equity measures how much of the company is financed by debt and equity. It is computed as follows:

To illustrate, the ratio of liabilities to stockholders' equity for Lincoln Company is computed as follows

                 
      Current Assets - Current
Liabilities
= Calculated Value  
1. Working capital:                 
                 
  Ratio   Numerator ÷ Denominator = Calculated Value  
                 
2. Current ratio                 
                 
3. Quick ratio                 
                 
4. Accounts receivable            
  turnover                 
                 
5. Number of days'            
  sales in receivables               
                 
6. Inventory turnover               
                 
7. Number of days'            
  sales in inventory               
                 
8. Ratio of Fixed assets to            
  long-term liabilities               
                 
9. Ratio of liabilities to            
  stockholders' equity               
                 
10. Times interest earned               
                 
11. Asset turnover                 
                 
12. Return on total assets               
                 
13. Return on stockholders'            
  equity                 
                 
14. Return on common            
  stockholders' equity               
                 
15. Earnings per share            
  on common stock               
                 
16. Price-earnings ratio               
                 
17. Dividends per share            
  of common stock               
                 
18. Dividend yield                 
                 
20Υ6
20Y5
Total liabilities
$310,000
$829,500
$443,000
$787,500
Total stockholders' equity
Ratio of liabilities to
stockholders' equity
0.4 ($310,000 + $829,500)
0.6 ($443,000 + $787,500)
Transcribed Image Text:20Υ6 20Y5 Total liabilities $310,000 $829,500 $443,000 $787,500 Total stockholders' equity Ratio of liabilities to stockholders' equity 0.4 ($310,000 + $829,500) 0.6 ($443,000 + $787,500)
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