a mathxl.com ACCT 2010.010 FALL 2017 Save Homework: Chapter 9 Homework 70f 9 (B
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a mathxl.com ACCT 2010.010 FALL 2017 Save Homework: Chapter 9 Homework 70f 9 (B complete) HW Score: 46.95%, 5.16 of 1 1 pts core: 0.18 of 1 pt Question Help S9-15 (similar to) Examine the following selected financial information for The Deal in Town Co, Inc., and Best Stores, Inc, as of the end of their fiscal years ending in 2015 E (Click the icon to view the financial information.) 1. Complete the table, calculating all the requested information for the two companies. Use year-end figures in place of averages where needed for the purpose of 2. Evaluate each company's long-term debt-paying ability (strong, medium, weak) 1. Complete the table, calculating all the requested information for the two companies. Use year-end figures in place of averages where needed for the purpose of calculating ratios in this exercise. (Round your answers to two decimal places, X.XX. Enter amounts in millions as provided to you in the problem statement.) The Deal in Town Co. Inc. Best Stores, Inc. (In millions) . Total assets 2. Total Stockholders' equity 3. Operating income .. 4. Interest expense . 203,150 $ 71,580 $ 26,120 $ 2,036 2.84 $ 131,570 64.8 16,840 $ 3,065 1,400 5.49 ...$ 13,775 81.8 6. Total debt . . .. Enter any number in the edit fields and then click Check Answer. Clear AllExplanation / Answer
(in millions)
Formula
The Deal in Town Co., Inc,
Best Stores, Inc.
1
Total Assets
16,840.00
203,150.00
2
Total Stockholder's Equity
3,065.00
71,580.00
3
Operating income
1,400.00
26,120.00
4
Interest Expense
88.00
2,036.00
5
Leverage Ratio*
Total debt / Total Equity
4.49
1.84
6
Total Debt
Assets = Debt + Equity
13,775.00
131,570.00
7
Debt Ratio
Total debt / Total Asset
0.82
0.65
8
Times Interest Earned
Operating income / Interest Expense
15.91
12.83
* The most important leverage ratio is the debt to equity ratio that gives you an idea about the debt one company is in and the equity it has at its disposal.
Evaluation of each company’s long term debt paying ability –
Evaluation –
Best Stores, Inc., has stronger when compared to the deal in Town, Inc.
(in millions)
The Deal in Town Co., Inc,
Best Stores, Inc.
Ideal ratio
1
Leverage Ratio
4.49
1.84
1
2
Total Debt
13,775.00
131,570.00
3
Debt Ratio
0.82
0.65
0.5
4
Times Interest Earned
15.91
12.83
Higher is more Better
The higher the Leverage ratio indicates that the company may not be able to pay its debt.
If debt ratio is more than 0.5, than most of the assets are financed through debt.
The higher times interest earned ratio indicated a better health and more capable to meeting its interest obligation from operating earnings.
(in millions)
Formula
The Deal in Town Co., Inc,
Best Stores, Inc.
1
Total Assets
16,840.00
203,150.00
2
Total Stockholder's Equity
3,065.00
71,580.00
3
Operating income
1,400.00
26,120.00
4
Interest Expense
88.00
2,036.00
5
Leverage Ratio*
Total debt / Total Equity
4.49
1.84
6
Total Debt
Assets = Debt + Equity
13,775.00
131,570.00
7
Debt Ratio
Total debt / Total Asset
0.82
0.65
8
Times Interest Earned
Operating income / Interest Expense
15.91
12.83
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