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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

Long-term solvency analysis

The following information was taken from Charu Company’s balance sheet:

Fixed assets (net) $860,000
Long term liabilities 200,000
Total liabilities 600,000
Total stockholders’ equity 250,000

Determine the company’s (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders’ equity. Round to one decimal place.

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 fixed assets to long-term liabilities.

Given info: Fixed assets and long-term liabilities

Explanation

Ratio of fixed assets to long-term liabilities is determined by dividing fixed assets and long-term liabilities.

Formula:

Ratio of fixed�

b)

To determine

To compute: Ratio of liabilities to stockholders’ equity

Given info: Total liabilities and Stockholders’ equity

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