Use the balance sheets from Mike & Kat Racing Company in E10- 32B to compute a debt- to- equity ratio for 2010 and 2009. Suppose you calculated a debt ratio using debt plus equity as the denominator. Which ratio— debt- to- equity or debt-to- debt plus equity— seems easiest to interpret? As an investor, do you view the “trend” in the debt- to- equity ratio as favorable or unfavorable? Why? In E10- 32B .:. SOLUTIO: The debt to debt plus equity ratio is easier to interpret because it simply gives debt as a percentage of the firm’s total financing. The trend here suggests that the company is in a better position in 2010 than In 2009 so the trend Is favorable. The company has less debt relative to equity (because of a large increase in equity) and is therefore a less risky investment.
Answer to relevant QuestionsCrystal Cromartie’s Frozen Foods reported the following for the fiscal years ended September 30, 2011, and September 30, 2010:Assume there is no outstanding preferred stock and all sales are credit sales. Calculate the ...Liquidity ratios. (LO3). Use the financial statements for GameStop Corp. to calculate the following liquidity ratios for the most recent fiscal year: 1. Current ratio 2. Inventory turnover and average days in inventory 3. ...The following financial statements were taken from the 2010 annual report of Presentations Company:Presentations CompanyIncome StatementFor the Year Ended December 31, 2010Sales revenue . . . . . . . . . . . . . . . . . . . ...The following information was taken from the annual report of ROM. The account balances are as of December 31, 2011.Cash.............. $ 1,220 Accounts receivable........ 3,112 Merchandise inventory....... 966 Prepaid ...Omicron Corporation invested $ 125,000 of its extra cash in securities. Under each of the following independent scenarios, (a) calculate the amount at which the investments would be valued for the year- end balance sheet, ...
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