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Debt Ratio: Total assets and the total liabilities are used to construct this ratio. Debt ratio reflects the finance strategy of the company. It is used to evaluate company’s ability to pay its debts. Higher debt ratio implies the higher financial risk.
Earnings per Share: It is a mandatory term to be reported with the financials of a company in the annual report. It reflects the amount earned or lost on each outstanding common equity share. It is widely used to evaluate the performance of a business.
1.
To Compute: Current ratio, debt ratio and earnings per share of M Company.
2.
a.
To Evaluate: The effect of merchandise inventory purchase of $42,000 on account on current ratio, debt ratio and earnings per share.
b.
To Evaluate: The effect on current ratio, debt ratio and earnings per share after borrow $121,000 on a long-term notes payable on current ratio, debt ratio and earnings per share.
c.
To Evaluate: The effect on current ratio, debt ratio and earnings per share after issued 5,000 shares of common stock, received cash of $103,000.
d.
To Evaluate: The effect on current ratio, debt ratio and earnings per share after received cash on account $5,000.
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Chapter 17 Solutions
Horngren's Accounting (12th Edition)
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