Question

The following is a portion of the January 31, 2009 and 2008, balance sheets of Macy's, Inc.:

Macy's debt to equity ratio for the year ended January 31, 2009 was 3.8, calculated as $17,499 ÷ $4,646. Some analysts argue that long-term deferred tax liabilities should be excluded from liabilities when computing the debt to equity ratio.

Required:
1. What is the rationale for the argument that long-term deferred tax liabilities should be excluded from liabilities when computing the debt to equity ratio?
2. What would be the effect on Macy's debt to equity ratio of excluding deferred tax liabilities from its calculation? What would be the percentage change?
3. What might be the rationale for not excluding long-term deferred tax liabilities from liabilities when computing the debt to equity ratio?



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  • CreatedJuly 05, 2013
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