Connect Access Card for Financial Accounting: Information and Decisions
8th Edition
ISBN: 9781259662966
Author: John J Wild
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 2, Problem 11QS
Summary Introduction
Concept introduction:
Debt Ratio:
Debt ratio indicates the percentage of assets financed by debts. It is calculated by dividing total liabilities by total assets. The formula of debt ratio is as follows:
To calculate and interpret: the debt ratio of the company.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
In a recent year’s financial statements, Home Depot reported the following: Total liabilities = $38,633 million and Total assets = $42,966 million. Compute and interpret Home Depot’s debt ratio (assume competitors average a 60.0% debt ratio).
Refer to the following selected financial information from a company. Compute the company’s debt-to-equity ratio for Year 2.
Year 2
Year 1
Net sales
$ 484,500
$ 427,450
Cost of goods sold
277,500
251,320
Interest expense
10,900
11,900
Net income before tax
68,450
53,880
Net income after tax
47,250
41,100
Total assets
319,500
295,200
Total liabilities
175,400
168,500
Total equity
144,100
126,700
Answer:
A. 1.22.
B. 1.82.
C. 3.36.
D. 0.82.
E. 2.22.
Paddy's Pub reported the following year-end data:
Income before interest expense and income tax expense
Cost of goods sold
Interest expense
Total assets
Total liabilities
Total equity
Compute the (a) debt-to-equity ratio and (b) times Interest earned.
Complete this question by entering your answers in the tabs below.
Debt To Equity Times Interest
Ratio
Earned
Compute the debt-to-equity ratio.
Numerator:
1
1
Debt-To-Equity Ratio
Denominator:
II
Chapter 2 Solutions
Connect Access Card for Financial Accounting: Information and Decisions
Ch. 2 - Provide the names of two (a) asset accounts, (b)...Ch. 2 - What is the difference between a note payable and...Ch. 2 - Prob. 3DQCh. 2 - Prob. 4DQCh. 2 - Prob. 5DQCh. 2 - Should a transaction be recorded first in a...Ch. 2 - Prob. 7DQCh. 2 - Why does the recordkeeper prepare a trial balance?Ch. 2 - Prob. 9DQCh. 2 - Prob. 10DQ
Ch. 2 - Prob. 11DQCh. 2 - Prob. 12DQCh. 2 - Prob. 13DQCh. 2 - Prob. 14DQCh. 2 - Prob. 15DQCh. 2 - Review the Apple balance sheet in Appendix A....Ch. 2 - Prob. 17DQCh. 2 - Prob. 18DQCh. 2 - Identify the items from the following list that...Ch. 2 - Prob. 2QSCh. 2 - Prob. 3QSCh. 2 - Prob. 4QSCh. 2 - Prob. 5QSCh. 2 - Prob. 6QSCh. 2 - Prob. 7QSCh. 2 - Prob. 8QSCh. 2 - Prob. 9QSCh. 2 - Prob. 11QSCh. 2 - Prob. 1ECh. 2 - Prob. 2ECh. 2 - Prob. 3ECh. 2 - Prob. 4ECh. 2 - Prob. 5ECh. 2 - Prob. 6ECh. 2 - Prob. 7ECh. 2 - Prob. 9ECh. 2 - Prob. 11ECh. 2 - Prob. 12ECh. 2 - Prob. 13ECh. 2 - Prob. 14ECh. 2 - A corporation had the following assets and...Ch. 2 - Prob. 16ECh. 2 - Prob. 17ECh. 2 - Prob. 18ECh. 2 - Prob. 19ECh. 2 - Prob. 20ECh. 2 - Prob. 21ECh. 2 - Prob. 22ECh. 2 - Prob. 1PSACh. 2 - Prob. 2PSACh. 2 - Prob. 3PSACh. 2 - Prob. 4PSACh. 2 - Prob. 5PSACh. 2 - Prob. 1PSBCh. 2 - Prob. 2PSBCh. 2 - Prob. 3PSBCh. 2 - Nuncio Consulting complete the following...Ch. 2 - Prob. 5PSBCh. 2 - Prob. 2SPCh. 2 - Prob. 1BTNCh. 2 - Key comparative figures for Apple and Google...Ch. 2 - Assume that you are a cashier and your manager...Ch. 2 - Prob. 4BTNCh. 2 - Prob. 6BTNCh. 2 - Prob. 7BTNCh. 2 - Prob. 8BTNCh. 2 - Samsung (www.Samsung.com) is a market leader in...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Juroe Company provided the following income statement for last year: Juroes balance sheet as of December 31 last year showed total liabilities of 10,250,000, total equity of 6,150,000, and total assets of 16,400,000. Required: Note: Round answers to two decimal places. 1. Calculate the times-interest-earned ratio. 2. Calculate the debt ratio. 3. Calculate the debt-to-equity ratio.arrow_forwardReview of the financial statements revealed the following for Cullumber Inc.: sales $1256000, net income $43700, total assets $653120, long- term debt $761000, interest expense $65312 and cost of goods sold $781000. When preparing common- size financial statements, interest expense would be shown as a) 10.0% b) 9.2%. c) 8.4%. d) 5.2%.arrow_forwardCalculating Ratios and Estimating Credit Rating The following data are from Kellogg's 10-K report dated December 29, 2018 ($ millions). Revenue Interest expense Tax expense Amortization expense Depreciation expense $13,547 Earnings from continuing operations $1,344 Capital expenditures (CAPEX) 578 287 181 Total debt 8,893 23 Average assets 17,066 493 a. Use the data above to calculate the following ratios: EBITA/Average assets, EBITA Margin, EBITA/ Interest expense, Debt/EBITDA, CAPEX/Depreciation Expense. Definitions for these ratios are in Exhibit 7.4. b. Refer to Exhibit 7.4 and the ratios you calculated in part a. Estimate the credit rating that Moody's might assign to Kellogg. Round answers to one decimal place (percentage ex: 0.2345 = 23.5%) Ratio Moody's rating EBITA/Avg. assets EBITA margin EBITA/Int. expense Debt/EBITDA CAPEX/Dep. expense Please answer all parts of the question. 0% 0% 0 0 0 ◆ ◆arrow_forward
- Motorola Credit Corporation's annual report: Net revenue (sales) Net earnings Total assets Total liabilities Total stockholders' equity a. Find the total debt to total assets ratio. Note: Round your answer to the nearest hundredth percent. Total debt to total assets Return on equity b. Find the return on equity ratio. Note: Round your answer to the nearest hundredth percent. (dollars in millions) $ 297 163 2,175 1,880 295 Asset turnover c. Find the asset turnover ratio. Note: Round your answer to the nearest cent. Profit margin % % % d. Find the profit margin ratio on net sales. Note: Round your answer to the nearest hundredth percent.arrow_forwardCalculating the Debt Ratio and the Debt-to-Equity Ratio Ernst Company's balance sheet shows total liabilities of $32,766,300, total stockholders' equity of $8,998,000, and total assets of $41,764,300. Required: 1. Calculate the debt ratio. Round the percentage to two decimal places.fill in the blank 1% 2. Calculate the debt-to-equity ratio. Round to two decimal places.fill in the blank 2arrow_forwardThe comparative accounts payable and long-term debt balances for a company follow. Line Item Description Current Year Previous Year Accounts payable $116,280 $102,000 Long-term debt 129,600 120,000 Based on this information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis? Enter all answers as positive numbers.arrow_forward
- Refer to the following selected financial information from Gomez Electronics. Compute the company's debt-to-equity ratio for Year 2. Net sales Cost of goods sold Interest expense Net income before tax Net income after tax Total assets Total liabilities Total equity Year 2 $ 479,500 276,500 9,900 67,450 46,250 317,500 180,400 137,100 Year 1 $426,450 250,320 10,900 52,880 40,100 289, 200 167,500 121,700arrow_forwardRefer to the following selected financial information from Hansen's, LLC. Comput the company's debt-to-equity ratio for Year 2. Net sales Year 2 $478,500 Year 1 $426,250 Cost of goods sold 276,300 250.120 Interest expense 9,700 10,700 Net income before tax 67.250 52,680 Net income after tax 46,050 39,900 Total assets 317,100 288,000 Total liabilities 181,400 167,300 Total equity 135,700 120,700 О 1) 1.75. 2) 2.34. 3) 0.75. 4) 1.34. 5) 2.63.arrow_forwardGiven the following details, what is Layla Inc.’s debt ratio?Sales/Total assets - 1.5xReturn on assets - 3%Return on equity - 5%arrow_forward
- Margaret O'Flaherty, a portfolio manager for MCF Investments, is considering investing in Alpine Chemical 7% bonds, which mature in 10 years. She asks you to analyze the company to determine the riskiness of the bonds. Alpine Chemical Company Financial Statements Years Ended December 31, ($ in millions) 20X1 20X2 20X3 20X4 20X5 20X6 Assets Cash $ 55 $ 1,637 2,021 190 $ 2,143 1,293 157 249 $ 1,394 1,258 3,493 1,322 Accounts receivable 3,451 1,643 2,087 Inventories 945 Other current assets 17 27 55 393 33 171 5,097 6,181 Current assets 3,114 5,038 2,543 2,495 3,986 5,757 3,138 3,865 2,707 5,619 2,841 2,778 5,265 4,650 2,177 2,473 Gross fixed assets 7,187 3,893 3,465 2,716 Less: Accumulated depreciation Net fixed assets 2,619 3,294 Total assets $6,338 $5,609 $5,485 $6,605 $7,813 $8,559 Liabilities and net worth Notes payable Accounts payable $1,300 338 $ 525 2$ 750 $1,750 $1,900 673 638 681 743 978 Accrued liabilities 303 172 359 359 483 761 Current liabilities 1,501 1,985 1,997 1,457…arrow_forwardAssigning a Long-Term Debt Rating Using Financial Ratios Refer to the information below from Stryker’s 2018 financial statements. Use the information to answer the requirements ($ millions). Revenue $13,601 Interest expense, gross $181 Depreciation expense 306 Dividends, including to noncontrolling interest 717 Amortization expense 417 Cash and cash equivalents 3,616 Operating profit (EBIT) 2,537 Marketable securities 83 Total debt 9,859 Average assets 24,713 Cash from operating activities 2,610 CAPEX 572 Funds from operations 2,852 a. Compute the following 10 Moody’s metrics for Stryker for 2018.Round all answers (except Revenue) to one decimal place (example for percentage ratios: 0.2345 = 23.5%). Ratio Debt / EBITDA Answer EBITA to interest expense Answer Revenue ($ millions) Answer Retained Cash Flow / Net Debt Answer EBITA margin Answer Operating margin Answer FFO / Debt Answer (FFO + Interest Expense)/Interest Expense Answer…arrow_forwardEffect of transactions on ratios Indicate the effects (increase, decrease or no effect) of each of the following independent transactions on: 1. the rate of return on shareholders ’ equity 2. the current ratio 3. the debt-to-equity ratio. State any necessary assumptions. a) Inventory costing $410 000 is purchased on account. b) Inventory costing $240 000 is sold on account for $300 000. c) Collections from customers on accounts receivable total $100 000. d) Payments to suppliers on accounts payable total $160 000. e) A machine costing $80 000, on which $60 000 of depreciation was charged, is sold for $20 000. f) Dividends of $80 000 are declared. The dividends will be paid during the next accounting period. g) Ordinary shares are issued for $175 000. h) A machine costing $60 000 is acquired. Cash of $10 000 is given, and a note for $50 000 payable five years from now is signed for the balance of purchase price.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License