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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