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K This problem demonstrates the dramatic effect that consolidation accounting can have on a company's ratios OPN Company owns 100% of OPN Credit Corporation, its
K This problem demonstrates the dramatic effect that consolidation accounting can have on a company's ratios OPN Company owns 100% of OPN Credit Corporation, its financing subsidiary OPN's main operations consist of manufacturing automotive products. OPN Credit Corporation mainly helps people finance the purchase of automobiles from OPN and its dealers. The two companies' individual balance sheets are adapted and summarized as follows (amounts in billions) (Click the icon to view the balance sheet information.) Required 1. Compute the debt ratio of OPN Company considered alone 2. Determine the consolidated total assets, total liabilities, and shareholders' equity of OPN Company after consolidating the financial statements of OPN Credit into the totals of OPN, the parent company. 3. Recompute the debt ratio of the consolidated entity. Why do companies prefer not to consolidate their financing subsidiaries into their own financial statements? Requirement 1. Compute the debt ratio of OPN Company considered alone
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