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AccountingCornerstones of Financial Accounting4th Edition

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Chapter 12, Problem 62BE
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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

Solutions

Chapter
Section
Problem 1DQ
Problem 2DQ
Problem 3DQ
Problem 4DQ
Problem 5DQ
Problem 6DQ
Problem 7DQ
Problem 8DQ
Problem 9DQ
Problem 10DQ
Problem 11DQ
Problem 12DQ
Problem 13DQ
Problem 14DQ
Problem 15DQ
Problem 16DQ
Problem 1MCQ
Problem 2MCQ
Problem 3MCQ
Problem 4MCQ
Problem 5MCQ
Problem 6MCQ
Problem 7MCQ
Problem 8MCQ
Problem 9MCQ
Problem 10MCQ
Problem 11MCQ
Problem 12MCQ
Problem 13MCQ
Problem 14MCQ
Problem 15MCQ
Problem 16MCQ
Problem 17MCQ
Problem 18MCQ
Problem 19MCQ
Problem 20MCQ
Problem 21MCQ
Problem 22MCQ
Problem 23MCQ
Problem 24MCQ
Problem 25MCQ
Problem 26MCQ
Problem 27MCQ
Problem 28MCQ
Problem 29MCQ
Problem 30MCQ
Problem 31MCQ
Problem 32MCQ
Problem 33MCQ
Problem 34MCQ
Problem 35MCQ
Problem 36MCQ
Problem 37MCQ
Problem 38MCQ
Problem 39MCQ
Problem 40MCQ
Problem 41MCQ
Problem 42MCQ
Problem 43MCQ
Problem 44MCQ
Problem 45MCQ
Problem 46CE
Problem 47CE
Problem 48CE
Problem 49CE
Problem 50CE
Problem 51CE
Problem 52CE
Problem 53CE
Problem 54CE
Problem 55CE
Problem 56CE
Problem 57BE
Problem 58BE
Problem 59BE
Problem 60BE
Problem 61BE
Problem 62BE
Problem 63BE
Problem 64BE
Problem 65BE
Problem 66BE
Problem 67BE
Problem 68E
Problem 69E
Problem 70E
Problem 71E
Problem 72E
Problem 73E
Problem 74E
Problem 75E
Problem 76E
Problem 77E
Problem 78E
Problem 79E
Problem 80E
Problem 81E
Problem 82E
Problem 83E
Problem 84PSA
Problem 85PSA
Problem 86PSA
Problem 87PSA
Problem 88PSA
Problem 89PSA
Problem 90PSA
Problem 91PSA
Problem 92PSA
Problem 93PSA
Problem 84PSB
Problem 85PSB
Problem 86PSB
Problem 87PSB
Problem 88PSB
Problem 89PSB
Problem 90PSB
Problem 91PSB
Problem 92PSB
Problem 93PSB
Problem 94C
Problem 95.1C
Problem 95.2C
Problem 96.1C
Problem 96.2C
Problem 97.1C
Problem 97.2C
Problem 97.3C
Problem 97.4C
Problem 97.5C
Problem 97.6C
Problem 98.1C
Problem 98.2C
Problem 98.3C
Problem 99.1C
Problem 99.2C
Problem 99.3C
Problem 99.4C
Problem 99.5C
BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Debt Management and Short-Term Liquidity Ratios

Magellan Company is an international travel agency providing travel planning services to customers in over 20 Countries. Recently, the travel industry has been experiencing volatility as a result of increases in oil prices. Magellan’s investors have been following its financial information closely to determine its ability to continue as a going concern, Its investors have used the following information to determine financial ratios:

Chapter 12, Problem 62BE, Debt Management and Short-Term Liquidity Ratios Magellan Company is an international travel agency

Required:

Between 20l8 and 20l9, indicate whether Magellan’s debt to equity ratio increased or decreased. Also, indicate whether Magellan’s current ratio increased or decreased. Interpret these ratios.

To determine

Introduction:

Debt-equity ratio is calculated by dividing the total debt of the company to the shareholders fund. It is used to compute the financial leverage of a company.

Current ratio is the ratio of current assets to current liabilities.

To find:

The debt-equity ratio and current ratio of Figgins’ for the year 2018 and 2019 and comparing the results.

Explanation
  • Debt-equity ratio

Debt-equity ratio=Total liabilitiesTotal equity

Total liabilities for 2018 = Long-term liabilities + Current liabilities

= 0 + $2,200

= $2,200

Total liabilities for 2019 = $5,000 + $ 1,500

= $6,500

Debt-equity ratio for 2018=$2,200$3,900

= 0.56: 1

Debt-equity ratio for 2019=$6,500$3,900

= 1

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