Question
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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started