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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

What do the following data, taken from a comparative balance sheet, indicate about the company’s ability to borrow additional long-term debt in the current year as compared to the preceding year?

  Current Year Preceding Year

Fixed assets (net)

Total long-term liabilities

$1,260,000

300,000

$1,360,000

400,000

To determine

Ratio of fixed assets to long-term liabilities

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

Formula:

Ratiooffixedassetstolong-termliablities=FixedassetsLong-termliablities

To determine: The ratio of fixed assets to long-term liabilities.

Explanation

Ratio of fixed assets to long-term liabilities indicate that company is in stronger position in the current year...

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