Chapter 12, Problem 62BE

Debt Management and Short-Term Liquidity Ratios

Magellan Company is an international travel agency providing travel planning services to customers in over 20 Countries. Recently, the travel industry has been experiencing volatility as a result of increases in oil prices. Magellan’s investors have been following its financial information closely to determine its ability to continue as a going concern, Its investors have used the following information to determine financial ratios:

Required:

Between 20l8 and 20l9, indicate whether Magellan’s debt to equity ratio increased or decreased. Also, indicate whether Magellan’s current ratio increased or decreased. Interpret these ratios.