Thursday, February 28, 2019

PE 1-8A Ratio of liabilities to stockholders’ equity

The following data were taken from Mesa Company’s balance sheet:

                                          dec. 31, 2016 | dec. 31, 2015
Total liabilities                          $547,800 | $518,000
Total stockholders’ equity          415,000 | 370,000

a. Compute the ratio of liabilities to stockholders’ equity.

b. Has the creditor’s risk increased or decreased from December 31, 2015, to December 31, 2016?


Answer:
a. Dec. 31, Dec. 31, 
2016 2015 
  
Total    liabilities……………………………………………… $547,800 $518,000 
Total stockholders’ equity………………………………… $415,000 $370,000 
Ratio of liabilities to stockholders’ equity…………… 1.32* 
* $547,800 ÷ $415,000 
** $518,000 ÷ $370,000 

b. Decreased 

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