   Chapter 8, Problem 8.10.1MBA

Chapter
Section
Textbook Problem

Debt and price-earnings ratios Alphabet (formerly known as Google) (GOOG) is a technology company that offers users Internet search and e-mail services. Google also developed the Android operating system for use with cell phones and other mobile devices. The following data (in millions) were adapted from a recent financial statement of Alphabet. Compute the debt ratio for Years 1 and 2. Round to one decimal place.

To determine

Concept Introduction:

Debt Ratio:

Debt ratio is the relationship between the Total liabilities and Total Assets of a corporation. Debt ratio shows the part of assets financed by debts. It is calculated by dividing total liabilities by total assets. The formula of debt ratio is as follows:

Debt Ratio = Total LiabilitiesTotal Assets

To Calculate:

The Debt Ratios for year 1 and 2

Explanation

The Debt Ratios for year 1 and 2 are calculated as follows:

 \$ in Millions Year 1 Year 2 Total Liabilities (A)

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