Chapter 8, Problem 8.8.2MBA

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 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 recent financial statements of The Home Depot. Given your answer lo part (1), what is the ratio of stockholders' equity to total assets? 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 Stockholder's Equity to total asset ratio using the Debt Ratios for year 1 and 2

Explanation

The Stockholder's Equity to total asset ratio using the Debt Ratios for year 1 and 2 is calculated as follows;

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

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