Chapter 2, Problem 3.2AA

1.

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 a 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 S during the current year and prior year.

2.

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 a 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.

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

Whether the financial leverage of S has been increasing or decreasing in the current year.

3.

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 a 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.

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

If investment in S is risky or less risky when compared with A and G.