View the portion of the balance sheet of Macy's Inc.for the years ended January30,2016,and January31,2015.

Macy's debt to equity ratio for the year ended January30,2016,was3.84,calculated as($20,576-4,253)4,253.Some analysts argue that long-term deferred tax liabilities should be excluded from liabilities when computing the debt to equity ratio.

Jan. 30, 2016 Jan. 31, 2015

Liabilities and Shareholders' Equity

Current Liabilities:

Short-term debt $ 642 $ 76

Merchandise accounts payable 1,526 1,594

Accounts payable and accrued liabilities 3,333 3,109

Income Taxes 227 296

Total Current Liabilities 5,728 5,075

Long-Term debt 6,995 7,233

Deferred Income Taxes 1,477 1,443

Other Liabilities 2,123 2,201

Shareholders' Equity

Common stock (310.3 and 340.6 shares outstanding) 3 4

Additional paid-in capital 621 1,048

Accumulated equity 6,334 7,340

Treasury stock (1,665) (1,942)

Accumulated other comprehensive loss (1,043) (1,072)

Total Macy's, Inc. Shareholders' Equity 4,250 5,378

Noncontrolling interest 3

Total Shareholders' Equity 4,253 5,378

Total Liabilities and Shareholders' Equity $20,576 $21,330

Required:

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?