# 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.

### Accounting

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

### 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 earnedHasbro, 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.

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