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.…
