Hasbro, Inc. (HAS), and Mattel, Inc. (MAT), are the two largest toy companies in North America. Condensed liabilities and stockholders’ equity from a recent balance sheet are shown for each company as follows (in thousands): Hasbro Mattel Liabilities: Current liabilities $1,617,859 $1,505,573 Long-term debt 1,588,067 2,580,439 Total liabilities $3,205,926 $4,086,012 Total stockholders’ equity $1,862,736 $2,407,782 Total liabilities and stockholders’ equity $5,068,662 $6,493,794 The operating income and interest expense from the income statement for each company were as follows (in thousands): Hasbro Mattel Operating income (before income tax expense) $692,489 $409,472 Interest expense 97,405 95,118 a. Determine the ratio of liabilities to stockholders' equity for both companies. Round to one decimal place. Hasbro Inc. Mattel Inc. b. Determine the times interest earned ratio for both companies. Round to one decimal place. Hasbro Inc. Mattel Inc. c. Together, these ratios indicate that earnings are to make interest payments. With that said, Hasbro does provide creditors with a margin of safety than Mattel.

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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Ratio of Liabilities to Stockholders' Equity and Times Interest Earned

Hasbro, Inc. (HAS), and Mattel, Inc. (MAT), are the two largest toy companies in North America. Condensed liabilities and stockholders’ equity from a recent balance sheet are shown for each company as follows (in thousands):

	Hasbro	Mattel
Liabilities:
Current liabilities	$1,617,859		$1,505,573
Long-term debt	1,588,067		2,580,439
Total liabilities	$3,205,926		$4,086,012
	Total stockholders’ equity	$1,862,736		$2,407,782
	Total liabilities and stockholders’ equity	$5,068,662		$6,493,794

The operating income and interest expense from the income statement for each company were as follows (in thousands):

	Hasbro	Mattel
Operating income (before income tax expense)	$692,489		$409,472
Interest expense	97,405		95,118

a. Determine the ratio of liabilities to stockholders' equity for both companies. Round to one decimal place.

Hasbro Inc.
Mattel Inc.

b. Determine the times interest earned ratio for both companies. Round to one decimal place.

Hasbro Inc.
Mattel Inc.

c. Together, these ratios indicate that earnings are to make interest payments. With that said, Hasbro does provide creditors with a margin of safety than Mattel.

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