Chapter 8, Problem 8.10.4MBA

### Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

Chapter
Section

### Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
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. Are Google's operations financed primarily with liabilities or equity?

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 Indicate:

If the company is primarily finance with liabilities or equity

Explanation

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

 $in Millions Year 1 Year 2 Total Liabilities (A)$30,624 \$27,996

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