Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Company G has a ratio of liabilities to stockholders' equity of 0.12 and 0.28 for Year 1 and Year 2, respectively. In contrast, Company M

Company G has a ratio of liabilities to stockholders' equity of 0.12 and 0.28 for Year 1 and Year 2, respectively. In contrast, Company M has a ratio of liabilities to stockholders' equity of 1.13 and 1.29 for the same period. Required:

Based on this information, which company's creditors are more at risk?

A) Company G

B) Company M

Should the creditors of either company be concerned about the risk of nonpayment?

A) No, because the ratios are close to the industry average for both companies.

B) No, because business conditions are improving.

C) Yes, because ratios for both companies have increased over the period.

D) Yes, because the liabilities are low compared to stockholders' equity.

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

Quality Management Audits In Nuclear Medicine Practices IAEA Human Health Series No 33

Authors: International Atomic Energy Agency

2nd Edition

9201017154, 978-9201017154

More Books

Students also viewed these Accounting questions

Question

given a hash table with size 7

Answered: 1 week ago

Question

2. What is the business value of security and control?

Answered: 1 week ago