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a s Home - LookingGlass Home - LookingGlass Dashboard W WileyPLUS Open Assignment CALCULATOR MESSAGE HY INSTRUCTOR FULL SCREEN PRINTER VERSION 1 BACK NEXT > Suppose McDonald's 2017 financial statements contain the following selected data (in millions). ASSIGNMENT RESOURCES HW 20 Ch 10 LO 3-5 Brief Exercise 10-13 Brief Exercise 10-16 Exercise 10-14 Exercise 10-16 Problem 10.44 Current assets Total assets Current liabilities Total liabilities $3.460.0 29.110.0 3,018. 17.757.0 Interest expense Income taxes Net income $477.0 1,866.0 4,356.0 Compute the following values. Review Score Review Results by Study Objective 1. Working capital. millions 2. Current ratio. (Round to 2 decimal places, e.g. 6.25:1.) 3. Debt to assets ratio. (Round to O decimal places, e.g. 62%.) 4. Times interest earned. (Round to 2 decimal places, e.g. 6.25.) times LINK TO TEXT Suppose the notes to McDonald's financial statements show that subsequent to 2017 the company will have future minimum lease payments under operating leases of $17.451.0 million. If these assets had been purchased with debt, assets and liabilities would rise by approximately 9.100 million. Recompute the debt to assets ratio after adjusting for this. (Round answer to 0 decimal places, c.g. 6296.) Debt to assets ratio LINK TO TEKT License Agreement | Privacy Policy | 2000-2018 John Wiley & Sons, Inc. All Rights Reserved. A Division of John Wiley Sons, Inc. Version 4.24.5.1 + Type here to search o e A , 1 8:23 PM 4/9/2018 1

Explanation / Answer

1. Working Capital = Current Assets - Current Liabilities
= $3,460 - $3,018 = $442 millions

2. Current Ratio =  Current Assets / Current Liabilities
  = $3,460 / $3,018 = 1.15 : 1

3. Debt to assets ratio = Total Debt / Total assets
= $17,757 / $29,110 = 61%

4. Times interest earned = EBIT / Interest expense
= ($4,356 + $1,866 + $477) / $477
= 14.04 times   

Debt to assets ratio = Total Debt / Total assets
= ($17,757 + $9,100) / ($29,110 + $9,100) = 70%

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