FINANCIAL & MANAG ACCT (CH. 1 - 24 EBOOK
9th Edition
ISBN: 9781264511068
Author: Wild
Publisher: MCG
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Chapter 10, Problem 7PSA
1)
To determine
Introduction: The debt-to-equity (D/E) ratio measures how heavily a company relies on debt by comparing its total liabilities to shareholder equity. A larger D/E ratio denotes greater risk, whereas a particularly low one can signify that a company is not utilizing debt funding for expansion.
To compute: The debt-to-equity ratio
2)
To determine
Introduction: The debt-to-equity (D/E) ratio measures how heavily a company relies on debt by comparing its total liabilities to shareholder equity. A larger D/E ratio denotes greater risk, whereas a particularly low one can signify that a company is not utilizing debt funding for expansion.
The company having a riskier financial structure.
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At the end of the current year, the following information is available for both Pulaski Company and Scott Company.
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Scott Company
Total assets
$
2,287,500
$
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Total liabilities
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591,000
1. Compute the debt-to-equity ratios for both companies.2. Which company has the riskier financing structure?
What do the following ratios reveal about the financial health of a company? And how do I calculate them?
Long-Term Debt-paying Ability
Debt Ratio
Debt-equity Ratio
Times Interest Earned
Assigning 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
$181
Depreciation expense
306
Dividends, including to noncontrolling interest
717
Amortization expense
417
Cash and cash equivalents
3,616
Operating profit (EBIT)
2,537
Marketable securities
83
Total debt
9,859
Average assets
24,713
Cash from operating activities
2,610
CAPEX
572
Funds from operations
2,852
a. Compute the following 10 Moody’s metrics for Stryker for 2018.Round all answers (except Revenue) to one decimal place (example for percentage ratios: 0.2345 = 23.5%).
Ratio
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Answer
EBITA to interest expense
Answer
Revenue ($ millions)
Answer
Retained Cash Flow / Net Debt
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EBITA margin
Answer
Operating margin
Answer
FFO / Debt
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(FFO + Interest Expense)/Interest Expense
Answer…
Chapter 10 Solutions
FINANCIAL & MANAG ACCT (CH. 1 - 24 EBOOK
Ch. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - Prob. 3QSCh. 10 - Prob. 4QSCh. 10 - Prob. 5QSCh. 10 - Prob. 6QSCh. 10 - Prob. 7QSCh. 10 - Prob. 8QSCh. 10 - Prob. 9QSCh. 10 - Prob. 10QS
Ch. 10 - Prob. 11QSCh. 10 - Prob. 12QSCh. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Prob. 15QSCh. 10 - Prob. 16QSCh. 10 - Prob. 17QSCh. 10 - Prob. 18QSCh. 10 - Prob. 19QSCh. 10 - Prob. 20QSCh. 10 - Prob. 21QSCh. 10 - Prob. 22QSCh. 10 - Prob. 23QSCh. 10 - Prob. 24QSCh. 10 - Prob. 1ECh. 10 - Prob. 2ECh. 10 - Prob. 3ECh. 10 - Prob. 4ECh. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - Prob. 7ECh. 10 - Prob. 8ECh. 10 - Prob. 9ECh. 10 - Prob. 10ECh. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Prob. 18ECh. 10 - Prob. 19ECh. 10 - Prob. 20ECh. 10 - Prob. 21ECh. 10 - Prob. 22ECh. 10 - Prob. 23ECh. 10 - Prob. 1PSACh. 10 - Prob. 2PSACh. 10 - Prob. 3PSACh. 10 - Prob. 4PSACh. 10 - Prob. 5PSACh. 10 - Prob. 6PSACh. 10 - Prob. 7PSACh. 10 - Prob. 8PSACh. 10 - Prob. 9PSACh. 10 - Prob. 10PSACh. 10 - Prob. 11PSACh. 10 - Prob. 12PSACh. 10 - Prob. 13PSACh. 10 - Prob. 1PSBCh. 10 - Prob. 2PSBCh. 10 - Prob. 3PSBCh. 10 - Prob. 4PSBCh. 10 - Prob. 5PSBCh. 10 - Prob. 6PSBCh. 10 - Prob. 7PSBCh. 10 - Prob. 8PSBCh. 10 - Prob. 9PSBCh. 10 - Prob. 10PSBCh. 10 - Problem 10-10BB Effective Interest: Amortization...Ch. 10 - Prob. 12PSBCh. 10 - Prob. 13PSBCh. 10 - Prob. 10SPCh. 10 - Prob. 1.1AACh. 10 - Prob. 1.2AACh. 10 - Prob. 1.3AACh. 10 - Prob. 2.1AACh. 10 - Prob. 2.2AACh. 10 - Prob. 2.3AACh. 10 - Prob. 3.1AACh. 10 - Prob. 3.2AACh. 10 - Prob. 3.3AACh. 10 - Prob. 1DQCh. 10 - Prob. 2DQCh. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - What is the issue price of a $2,000 bond sold at...Ch. 10 - Prob. 11DQCh. 10 - Prob. 12DQCh. 10 - Prob. 13DQCh. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - Prob. 1BTNCh. 10 - Prob. 2BTNCh. 10 - Prob. 3BTNCh. 10 - Prob. 4BTN
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- Examine the followingselected financial information for The Deal Corporation and Simple Stores, Inc., as of theend of their fiscal years ending in 2018:1. Complete the table, calculating all the requested information for the two companies. Useyear-end figures in place of averages where needed for the purpose of calculating the ratiosin this exercise. 2. Evaluate each company’s long-term debt-paying ability (strong, medium, weak)arrow_forwardAssigning a Long-Term Debt Rating Using Financial Ratios Refer to the information below from Stryker’s 2018 financial statements. Use the information to answer the requirements ($ 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_forwardUse Tableau to calculate and display the trends for the debt to equity and times interest earned ratios for each of the two companies in the period 2018-2021. the average debt to equity ratio and times interest earned ratio for companies in the General Retailers industry sector in a comparable time period are 1.92 and 10.6, respectively. 1. Other things being equal, do both companies appear to have the ability to meet their obligations as measured by the debt to equity ratio? 2. Based solely on the times interest earned ratios, do you reach the same conclusion as in Requirement 1? 3. Is the margin of safety provided to creditors by Discount Goods improving or declining in recent years as measured by the average times interest earned ratio?arrow_forward
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