Chapter 2, Problem 29E

a.

To determine

Concept Introduction:

Debt ratio: The debt ratio measures the percentage of shares financed by debt, the higher debt ratio is considered riskier for the business, because higher debt ratio indicates the larger portion of assets are funded by external debt, it is computed as total liabilities divided by the total of assets.

  $\text{Debt ratio}=\frac{\text{Total}\text{liabilities}}{\text{Total}\text{}\text{assets}}$

The Debt ratio for A in the current year and the prior year.

b.

To determine

Concept Introduction:

Debt ratio: Debt ratio measures the percentage of shares financed by debt, the higher debt ratio is considered riskier for the business, because a higher debt ratio indicates a larger portion of assets are funded by external debt, it is computed as total liabilities divided by the total of assets.

The company has a high degree of financial leverage.