Question
The following is a portion of the February 2014 and 2013 balance sheets of Macy's, Inc. : (Please refer to the attachment to view balance
The following is a portion of the February 2014 and 2013 balance sheets ofMacy's, Inc.:
(Please refer to the attachment to view balance sheet)
Macy's debt to equity ratio for the year ended February 1, 2014, was 2.46, calculated as ($21,634 - 6,249) 6,249. Some analysts argue that long-term deferred tax liabilities should be excluded from liabilities when computing the debt to equity ratio.
1.What is the rationale for the argument that long-term deferred tax liabilities should be excluded from liabilities when computing the debt to equity ratio?
2.What would be the effect on Macy's debt to equity ratio of excluding deferred tax liabilities from its calculation? What would be the percentage change?
3.What might be the rationale for not excluding long-term deferred tax liabilities from liabilities when computing the debt to equity ratio?
Analysing the effect of The following is a portion of the February 2014 and 2013 balance sheets of Macy's, Inc.: deferred tax liabilities on firm risk; Macy's, Inc. Macy's debt to equity ratio for the year ended February 1, 2014, was 2.46, calculated as ($21,634 6,249) 6,249. Some analysts argue that longterm deferred tax liabilities should be excluded from liabilities when computing the debt to equity ratio. Required: 1. What is the rationale for the argument that longterm deferred tax liabilities should be excluded from liabilities when computing the debt to equity ratio? 2. What would be the effect on Macy's debt to equity ratio of excluding deferred tax liabilities from its calculation? What would be the percentage change? 3. What might be the rationale for not excluding longterm deferred tax liabilities from liabilities when computing the debt to equity ratio
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