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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Debt and price-earnings ratios
The Home Depot. Inc. (HD) operates over 2.200 home improvement retail stores and is a competitor of Lowe's (LOW). The following data (in millions) were adapted from tecent financial statements of The Home Depot.
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 MillionsYear 1Year 2
    Total Liabilities (A)

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