Chapter 17, Problem 15E

### Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124
Textbook Problem
12 views

# Ratio of liabilities to stockholdersâ€™ equity and ratio of fixed assets to long-term liabilitiesRecent balance sheet information for two companies in the food industry, Mondelez International, Inc. and The Hershey Company, is as follows (in thousands): a. Determine the ratio of liabilities to stockholdersâ€™ equity for both companies. Round to one decimal place. b. Determine the ratio of fixed assets to long-term liabilities for both companies. Round to one decimal place. c. Interpret the ratio differences between the two companies.

(a)

To determine

Compute Ratio of liabilities to stockholders’ equity

Explanation

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

Ratio of liabilities to stockholdersâ€™ equity is determined by dividing liabilities and stockholdersâ€™ equity.

Formula:

Â RatioÂ ofÂ liabilitiesÂ toÂ stockholders'Â equity=TotalÂ liabilitiesStockholders'Â equity

Compute ratio of liabilities to stockholdersâ€™ equity for M.Â

Â RatioÂ ofÂ liabilitiesÂ toÂ stockholders'Â equity}=FixedÂ assetsÂ (Net)Long-termÂ liabilities=$10,010,000$28,390,000=0.4

Compute ratio of liabilities to stockholdersâ€™ equity for H

(b)

To determine

Compute ratio of fixed assets to long-term liabilities

(c)

To determine

Interpret the ratio differences between the two companies.

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