Hasbro, Inc. (HAS), and Mattel, Inc. (MAT), 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 $1,617,859   $1,505,573     Long-term debt 1,588,067   2,580,439     Total liabilities $3,205,926   $4,086,012       Total stockholders’ equity $1,862,736   $2,407,782     Total liabilities and stockholders’ equity $5,068,662   $6,493,794   The operating income and interest expense from the income statement for each company were as follows (in thousands):   Hasbro Mattel Operating income (before income tax expense) $692,489   $409,472   Interest expense 97,405   95,118   a.  Determine the ratio of liabilities to stockholders' equity for both companies. Round to one decimal place. Hasbro Inc.   Mattel Inc.   b.  Determine the times interest earned ratio for both companies. Round to one decimal place. Hasbro Inc.   Mattel Inc.   c.  Together, these ratios indicate that earnings are   to make interest payments. With that said, Hasbro does provide creditors with a   margin of safety than Mattel.

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
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Chapter16: Financial Statement Analysis
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Problem 14E: Hasbro, Inc. (HAS), and Mattel, Inc. (MAT), are the two largest toy companies in North America....
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Ratio of Liabilities to Stockholders' Equity and Times Interest Earned

Hasbro, Inc. (HAS), and Mattel, Inc. (MAT), 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 $1,617,859   $1,505,573  
  Long-term debt 1,588,067   2,580,439  
  Total liabilities $3,205,926   $4,086,012  
    Total stockholders’ equity $1,862,736   $2,407,782  
  Total liabilities and stockholders’ equity $5,068,662   $6,493,794  

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

  Hasbro Mattel
Operating income (before income tax expense) $692,489   $409,472  
Interest expense 97,405   95,118  

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

Hasbro Inc.  
Mattel Inc.  

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

Hasbro Inc.  
Mattel Inc.  

c.  Together, these ratios indicate that earnings are   to make interest payments. With that said, Hasbro does provide creditors with a   margin of safety than Mattel.

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