McDonald’s 2004 financial statements contain the following selected data (in solvency ratios; discuss millions).

impact of unrecorded obligations on liquidity and bolvency, Current assets $ 2,857.8 Interest expense $358.4

(SO 7) Total assets 21-831.) Income taxes 923.9 Eas Current liabilities 8,520) Net income 2 2085 Total liabilities 13,636 Instructions

(a) Compute the following values and provide a brief interpretation of each.

(1) Working capital. (3) Debt to total assets ratio.

(2) Current ratio. (4) Times interest earned ratio.

(b) The notes to McDonald’s financial statements show that subsequent to 2004 the company will have future minimum lease payments under operating leases of $11,442.6 million. If these assets had been purchased with debt, assets and liabilities would rise by approximately $10,500 million. Recompute the debt to total assets ratio after adjusting for this. Discuss your result.

Calculate current ratio before