close solutoin list

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 $ 1,064,647 $ 1,645,572 Long-term debt 1,547,115 1,800,000 Other liabilities 404,883 473,863 Total liabilities $3,016,645 $3,919,435 Stockholders' equity: Common stock $ 104,847 $ 441,369 Additional paid in capital 893,630 1,789,870 Retained earnings 3,852,321 3,745,815 Accumulated other comprehensive loss and other equity items (146,001) (848,899) Treasury stock, at cost (3,040,895) (2,494,901) Total stockholders' equity $ 1,663,902 $ 2,633,254 Total liabilities and stockholders' equity $ 4,680,547 $ 6,522,689 The income from operations and interest expense from the income statement for each company were as follows (in thousands): Hasbro Mattel Income from operations (before income tax) $603,915 $463,915 Interest expense 97,122 85,270 a. Determine the ratio of liabilities to stockholders’ equity for both companies. Round to one decimal place. b. Determine the times interest earned ratio for both companies. Round to one decimal place. c . Interpret the ratio differences between the two companies.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 17, Problem 17.14EX
Textbook Problem

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 $ 1,064,647 $ 1,645,572
Long-term debt 1,547,115 1,800,000
Other liabilities 404,883 473,863
Total liabilities $3,016,645 $3,919,435
Stockholders' equity:    
Common stock $ 104,847 $ 441,369
Additional paid in capital 893,630 1,789,870
Retained earnings 3,852,321 3,745,815
Accumulated other comprehensive loss and other equity items (146,001) (848,899)
Treasury stock, at cost (3,040,895) (2,494,901)
Total stockholders' equity $ 1,663,902 $ 2,633,254
Total liabilities and stockholders' equity $ 4,680,547 $ 6,522,689

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

  Hasbro Mattel
Income from operations (before income tax) $603,915 $463,915
Interest expense 97,122 85,270

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

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

c. Interpret the ratio differences between the two companies.

Expert Solution

(a)

To determine

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

To compute: Ratio of liabilities to stockholders’ equity

Given info: Total liabilities and Stockholders’ equity

Explanation of Solution

Ratio of liabilities to stockholders’ equity is determined by dividing liabilities and stockholders’ equity.

Formula:

 Ratio o

Expert Solution

(c)

To determine

To provide: Conclusion about company’s ability to meet its currently maturing debt.

Want to see this answer and more?

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

See solution

Chapter 17 Solutions

Accounting
Show all chapter solutions
Ch. 17 - Horizontal analysis The comparative temporary...Ch. 17 - Horizontal analysis The comparative accounts...Ch. 17 - Vertical analysis Income statement information for...Ch. 17 - Vertical analysis Income statement information for...Ch. 17 - Current position analysis The following items are...Ch. 17 - Current position analysis The followingitems are...Ch. 17 - Accounts receivable analysis A company reports the...Ch. 17 - Accounts receivable analysis A company reports the...Ch. 17 - Inventory analysis A company reports the...Ch. 17 - Inventory analysis A company reports the...Ch. 17 - Long-term solvency analysis The following...Ch. 17 - Long-term solvency analysis The following...Ch. 17 - Times interest earned A company reports the...Ch. 17 - Times interest earned A company reports the...Ch. 17 - Asset turnover A company reports the following:...Ch. 17 - Asset turnover A company reports the following:...Ch. 17 - Return on total assets A company reports the...Ch. 17 - Return on total assets A company reports the...Ch. 17 - Common stockholders profitability analysis A...Ch. 17 - Common stockholders profitability analysis A...Ch. 17 - Earnings per share and price-earnings ratio A...Ch. 17 - Earnings per share and price-earnings ratio A...Ch. 17 - Vertical analysts of income statement Revenue and...Ch. 17 - Vertical analysis of income statement The...Ch. 17 - Common-sized income statement Revenue and expense...Ch. 17 - Vertical analysis of balance sheet Balance sheet...Ch. 17 - Horizontal analysis of the income statement Income...Ch. 17 - Current position analysis The following data were...Ch. 17 - Current position analysis PepsiCo, Inc., the...Ch. 17 - Current position analysis The bond indenture for...Ch. 17 - Accounts receivable analysis The following data...Ch. 17 - Accounts receivable analysis Xavier Scores Company...Ch. 17 - Inventory analysis The following data were...Ch. 17 - Inventory analysis QT, Inc. and Elppa Computers,...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Asset turnover Three major segments of the...Ch. 17 - Profitability ratios The following selected data...Ch. 17 - Profitability ratios Ralph Lauren Corporation...Ch. 17 - Six measures of solvency or profitability The...Ch. 17 - Five measures of solvency or profitability The...Ch. 17 - Earnings per share, price-earnings ratio, dividend...Ch. 17 - Price-earnings ratio; dividend yield The table...Ch. 17 - Earnings per share, discontinued operations The...Ch. 17 - Income statement and earnings per share for...Ch. 17 - Unusual items Explain whether Colston Company...Ch. 17 - Horizontal analysis of income statement For 20Y2,...Ch. 17 - Vertical analysis of income statement For 20Y2,...Ch. 17 - Effect of transactions on current position...Ch. 17 - Measures of liquidity, solvency, and profitability...Ch. 17 - Solvency and profitability trend analysis Addai...Ch. 17 - Horizontal analysis of income statement For 20Y2,...Ch. 17 - Vertical analysis of income statement For 20Y2,...Ch. 17 - Effect of transactions on current position...Ch. 17 - Measures of liquidity, solvency and profitability...Ch. 17 - Solvency and profitability trend analysis Crosby...Ch. 17 - Financial statement analysis The financial...Ch. 17 - Ethics in Action Rodgers Industries Inc. completed...Ch. 17 - Communication The president of Freeman Industries...Ch. 17 - Common-sized income statements The condensed...Ch. 17 - Profitability analysis Deere Company manufactures...Ch. 17 - Comprehensive profitability and solvency analysis...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions
What is a relation? What is a tuple?

Accounting Information Systems

What is inflation and what causes it?

Principles of Microeconomics (MindTap Course List)

What is inflation and what causes it?

Principles of Economics (MindTap Course List)

Why do economists make assumptions?

Essentials of Economics (MindTap Course List)

Is it better for a firms actual stock price in the market to be under, over, or equal to its intrinsic value? W...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Why must some employers file Form 1096?

PAYROLL ACCT.,2019 ED.(LL)-TEXT

Explain two ways crowding out may occur.

Economics (MindTap Course List)