10. Evaluate the below statements: 1. If the ratio of total liabilities to shareholder's equity increases, a ratio that must also increase is the total liabilities to total assets ratio. II. When compared to a debt-to-asset ratio, a debt-to-equity ratio would be higher than the debt-to-asset ratio. lI. A measure of the company's long-term debt paying ability is times interest earned ratio. Which of the below statements is/are false? a. Statements I and II are true. Ob. Only statement III is false. c. Statement III is true. d. All statements are true

10. Evaluate the below statements: 1. If the ratio of total liabilities to shareholder's equity increases, a ratio that must also increase is the total liabilities to total assets ratio. II. When compared to a debt-to-asset ratio, a debt-to-equity ratio would be higher than the debt-to-asset ratio. lI. A measure of the company's long-term debt paying ability is times interest earned ratio. Which of the below statements is/are false? a. Statements I and II are true. Ob. Only statement III is false. c. Statement III is true. d. All statements are true

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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10. Evaluate the below statements:
If the ratio of total liabilities to shareholder's equity increases, a ratio that must also
increase is the total liabilities to total assets ratio.
1.
I.
When compared to a debt-to-asset ratio, a debt-to-equity ratio would be higher than
the debt-to-asset ratio.
fll.
A measure of the company's long-term debt paying ability is times interest earned ratio.
Which of the below statements is/are false?
a. Statements I and II are true.
b. Only statement III is false.
c. Statement III is true.
d. All statements are true

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RATIO ANALYSIS. Debt Ratio Activity 6 · Understand the information provided by the debt ratio. · Identify the expected range and whether an increasing or decreasing trend is preferred. Purpose: The debt ratio compares total liabilities to total assets. This ratio measures the proportion of assets financed by debt. It is a measure of long-term solvency. Total liabilities DEBT RATI0 = Total assets JOHNSON & CITIGROUP 12/31/99 HEWLETT- PACKARD 10/3 1/99 JOHNSON 1/03/99 WAL-MART 1/31/99 ($ in 000s) Assets $716,937,000 $35,297,000 $26,211,000 $49,996,000 Liabilities 667,251,000 17,002,000 12,621.000 28,884,000 Stockholders' Equity $ 49,686,000 $18,295,000 $13,590,000 $21,112,000 Source: Disclosure, Inc, Compact D/SEC, 2000. 1. For each-company listed above, compute the debt ratio. Record your results below. Debt ratio: 0.93 2. The debt ratios computed above are primarily in the ranġe (less than 0,40 / 0.40 through 0.70 / over 0.70): 3. % of Wal-Mart's assets are financed by debt. 4.…