At fiscal year-end December 31, 2015, Shop-World had the following assets and liabilities on its balance sheet

Question:

At fiscal year-end December 31, 2015, Shop-World had the following assets and liabilities on its (in millions):
Current liabilities ............ $9,459
Long-term debt .............. 12,330
Other liabilities .............. 1,180
Total assets ................... 37,411
Shop-World reported the following information on leases in the notes to the financial statements:
Total rent expense was $195 million in 2015, $189 million in 2014, and $188 million in 2013. Most of the long-term leases include options to renew, with terms varying from 1 to 50 years. Certain leases also include options to purchase the property.
Future minimum lease payments required under non-cancelable lease agreements existing at December 31, 2015, were:

Required:
Your friend, Liz, loves to shop at Shop-World and is now interested in investing in the company. Tom, another friend of Liz, has told her that Shop-World's debt structure is risky, with obligations nearly 74% of total assets. Liz sees that debt on the balance sheet is 61% of total assets and is confused by Tom's comment. Write an explanation to Liz discussing the debt structure of Shop-World and why Tom thinks Shop-World is risky. Be sure to explain clearly to Liz what information appears on financial statements, as well as what information does not appear directly on the financial statements?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...