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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Ratio of liabilities to stockholders’ equity and ratio of fixed assets to long term liabilities

Recent balance sheet information for two companies in the food industry, Mondelez International, Inc. and The Hershey Company, is as follows (in thousands):

  Mondelez Hershey
Net property, plant, and equipment $10,010,000 $1,674,071
Current liabilities 14,873,000 1,471,110
Long-term debt 15,574,000 1,530,967
Other long-term liabilities 12,816,000 716,013
Stockholders’ equity 32,215,000 1,036,749

a. Determine the ratio of liabilities to stockholders’ 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

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

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

Formula:

 Ratio of liabiliti

(b)

To determine

To compute: Ratio of fixed assets to long-term liabilities

Given info: Total fixed assets and long-term liabilities.

(c)

To determine

To interpret: The ratio differences between the two companies.

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