Chapter 10, Problem 2.3AA

1.

To determine

Concept Introduction

Debt-to-equity Ratio: The debt-to-equity (D/E) ratio measures a company's reliance on debt as the total liabilities are compared with the company’s shareholder equity. When the company has a larger D/E ratio, this denotes greater risk whereas when there is a low D/E ratio, this states that the company is not expanding well by using its funds.

The debt-to-equity ratio for both Company A and Company G for the current and prior years.

2.

To determine

Concept Introduction

Debt-to-equity Ratio: The debt-to-equity (D/E) ratio measures a company's reliance on debt as the total liabilities are compared with the company’s shareholder equity. When the company has a larger D/E ratio, this denotes greater risk whereas when there is a low D/E ratio, this states that the company is not expanding well by using its funds.

The company having a less risky financial structure.

3.

To determine

Concept Introduction

Debt-to-equity Ratio: The debt-to-equity (D/E) ratio measures a company's reliance on debt as the total liabilities are compared with the company’s shareholder equity. When the company has a larger D/E ratio, this denotes greater risk whereas when there is a low D/E ratio, this states that the company is not expanding well by using its funds.

To state: Whether the debt to equity ratio is less risky or riskier than compared to the average industry ratio.