Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Camper Company and McSead, Inc., are the two largest toy companies in North America. Condensed liabilities and stockholders' equity from a recent balance sheet are

Camper Company and McSead, Inc., are the two largest toy companies in North America. Condensed liabilities and stockholders' equity from a recent balance sheet are shown for each company as follows (in thousands):

Camper McSead
Current liabilities $3,560,000 $6,703,000
Long-term debt 1,916,800 2,660,000
Other liabilities _ 1,277,000
Total liabilities $5,476,800 $10,640,000
Shareholders' equity:
Common stock $266,000 $1,197,000
Additional paid in capital 822,000 4,389,000
Retained earnings 5,112,000 4,523,000
Accumulated other comprehensive
loss and other equity items 59,000 (732,000)
Treasury stock, at cost (2,347,000) (2,727,000)
Total stockholders' equity $3,912,000 $6,650,000
Total liabilities and stockholders' equity $9,388,800 $17,290,000

The income from operations and interest expense from the income statement for both companies were as follows (in thousands):

Camper McSead
Income from operations $999,360 $2,506,480
Interest expense 104,100 329,800

a. Determine the ratio of liabilities to stockholders' equity for both companies. Round to one decimal place.

Camper Company
McSead Inc.

b. Determine the number of times interest charges are earned for both companies. Round to one decimal place.

Camper Company
McSead Inc.

c. Together, these ratios indicate that both companies provide creditors with a margin of safety, and that earnings appear to make interest payments.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Agile Auditing Fundamentals And Applications

Authors: Raven Catlin, Danny M Goldberg, Ceciliana Watkins

1st Edition

1119693462, 9781119693468

More Books

Students also viewed these Accounting questions

Question

Do you set targets to reduce complaints?

Answered: 1 week ago