Adjusting for Off-Balance Sheet Liabilities Fitchs current analytical approach views operating leases as a debt-like form of funding and their analysts adjust core leverage and coverage ratios using a multiple to create a debt-equivalent for all companies that have not yet adopted the new lease standard. Fitch believes a standard 8 multiple is appropriate for assets with a long economic life, such as property leases. Specifically, Fitch multiplies the annual operating lease payments by 8 and adds that amount to debt prior to calculating ratios. In its 2018 annual report, Kohls reports the following amounts. Note: Kohls had not yet adopted the new lease standard.

$ millions	Feb. 2, 2019	Feb. 3, 2018
Liabilities	$7,011	$8,050
Total debt	3,534	4,559
Equity	5,527	5,419
Cash from operations	2,107	1,691
Operating lease payments (annual)	304	296

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Please answer the remaining part of C. thank you !

Required a. Why would Fitch make this sort of adjustment prior to calculating credit-risk ratios? In order to capture the true economic risk of the company - b. Compute Liabilities to equity and Cash from operations to debt for both years using the numbers as reported by Kohl's. Note: Round your answers to two decimal places (for example, enter 7.65 for 7.645555). Liabilities to equity Cash from operations to debt FY 2019 1.27 0.6 FY 2018 1.49 0.37 C. Adjust Kohl's total liabilities and debt for the 8x multiple and recalculate both ratios. Note: Round your answers to two decimal places (for example, enter 7.65 for 7.645555). FY 2019 X Liabilities to equity Cash from operations to debt FY 2018 OX 0.24 0.35