Using the year-end information for each of the following six separate companies ($ thousands): CaseAssetsLiabilitiesAverage AssetsNet Income
Question:
Using the year-end information for each of the following six separate companies ($ thousands):
CaseAssetsLiabilitiesAverage AssetsNet Income
Company 1$ 90,500$ 11,765 $ 100,000 $ 20,000
Company 264,00046,720 40,000 3,800
Company 332,50026,650 50,000 650
Company 4147,00055,860 200,000 21,000
Company 592,00031,280 40,000 7,520
Company 6104,50052,250 80,000 12,000
a.Calculate the debt ratio and the return on assets. (Round your debt ratios to 2 decimal places and return on assets to 3 decimal places.)
Case Debt Ratio ROA
Company 1
Company 2
Company 3
Company 4
Company 5
Company 6
b.Of the six companies, which business relies most heavily on creditor financing?
c.Of the six companies, which business relies most heavily on equity financing?
d.Which two companies indicate the greatest risk?
e.Which two companies indicate the greatest risk?
f.Which one company would investors likely prefer based on the risk
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield