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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Debt and price-earnings ratios
Lowe's Companies Inc. (LOW) operates over 1,800 home improvement retail stores and is a competitor of The Home Depot (HD). The following data (in millions) were adapted from a recent financial statement of Lowe's:

Arc Lowe'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 ratio is calculated as follows:

    $ in Millions
    Total Liabilities (A) $21,859

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