173. The following data were taken from Harrison Company’s balance sheet:
Dec. 31, 2012 Dec. 31, 2011
Total liabilities $150,000 $105,000
Total stockholders’ equity 75,000 60,000
a. Compute the ratio of liabilities to stockholders’ equity.
b. Has the creditors’ risk increased or decreased from December 31, 2011, to December 31, 2012?
a. 12/31/2012: $150,000 / 75,000 = 2.0
12/31/2011: $105,000 / 60,000 = 1.75
b. Decreased
174. Company G has a ratio of liabilities to stockholders’ equity of 0.12 and 0.28 for 2010 and 2011, respectively. In contrast, Company M has a ratio of liabilities to stockholders’ equity of 1.13 and 1.29 for the same period.
REQUIRED:
Based on this information, which company's creditors are more at risk and why? Should the creditors of either company fear the risk of nonpayment?
175. Given the following data:
Dec. 31, 2012 Dec. 31, 2011
Total liabilities $118,750 $104,000
Total stockholders’ equity 95,000 80,000
a. Compute the ratio of liabilities to stockholders’ equity for each year.
b. Has the creditors’ risk increased or decreased from December 31, 2011, to December 31, 2012?
a.
Dec. 31, 2012 Dec. 31, 2011
Total liabilities $118,750 $104,000
Total stockholders’ equity 95,000 80,000
Ratio of liabilities to stockholders’ equity 1.250 1.30
($118,750/$95,000) ($104,000/$80,000)
b. Decreased