AP10-14A (Debt to equity and net debt as a percentage of capitalization)

Uchida Genetics Corporation develops and markets biological pharmaceuticals. Uchida is approaching the bond market to raise money to buy equipment to manufacture a new biological therapy. The following is an extract from Uchida Genetics' statement of financial position:

UCHIDA GENETICS CORPORATION Statement of Financial Position (in thousands)
	December 31, 2020	December 31, 2019
Current assets
Cash	$ 245,000	$ 260,000
Trade receivables	255,000	570,000
Inventories	300,000	400,000
Total current assets	$ 800,000	$1,230,000
Non-current assets
Property, plant, and equipment	$1,250,000	$1,050,000
Right-of-use-assets	150,000	200,000
Intangible assets	15,000	10,000
Total non-current assets	$1,415,000	$1,260,000
Total assets	$2,215,000	$2,490,000
Current liabilities
Trade and other payables	$ 15,000	$ 25,000
Short-term borrowings	200,000	275,000
Current portion of long-term debt	50,000	60,000
Total current liabilities	$ 265,000	$ 360,000
Non-current liabilities
Long-term loan	$ 500,000	$ 800,000
Deferred income tax liabilities	50,000	55,000
Total non-current liabilities	$ 550,000	$ 855,000
Shareholders' Equity
Share capital	$ 900,000	$ 900,000
Retained earnings	500,000	375,000
Total shareholders' equity	$1,400,000	$1,275,000
Total liabilities and shareholders' equity	$2,215,000	$2,490,000

Required

a.

Prior to approaching the bond market, Uchida's management would like you to determine the company's debt to equity and net debt as a percentage of capitalization ratios for both years.

b.

Explain whether Uchida's debt to equity ratio and net debt as a percentage of capitalization ratios have improved in 2020.