Exercise 10-16 (Part Level Submission) Suppose McDonald\'s 2014 financial statem

Question

Exercise 10-16 (Part Level Submission) Suppose McDonald's 2014 financial statements contain the following selected data (in millions). Current assets otal asscts Current liabilties Total liabilitles $ 454.1 1,910 4,371.0 $3,378,2 Interest expense 31,45.4 Income taxes 2,934.6 Net income 15,959.4 (al) Your answer is correct. Compute the following values. (1 Working capital (in millions) (2) Current ratio (Round to 2 decinal places, e.g. 6.25:1.) (3) Debt to assets ratio (Round to 0 decimal places, e.g. 62%.) 4) Times interest earned (Round to 2 decimal places, e.q. 6.25.) 14.61 Limes Attempts: 1 of used (b1) Suppose the notes to McDonald's finaricial statements show that subsequent to 2014 the compay will have future minimum lease payments under operating leases of $10,330 millio. I Lhese assets had been purchased with debl, assets and liabilities would rise by pproximately 58 331 million. Ra compute the debt to assets ratio after adjusting for this. (Round to 0 decimal places e.g.62%.) Debt to assets ratio

Explanation / Answer

The minimum lease payments as mentioned in the notes to financial statements of MCD will not have any impact on Debt to assets ratio. Accordingly, there will not be any impact.

If the assets have been purchased with debt, the recomputed value of debt and equity will be as under:-

Assets: 39,790.4 Liabilities: 24,290.4

Hence, the Debt to Assets ratio is 24,290.4/39,790.4 = 61%

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