Which company appears more solvent? (Name a ratio used to determine.) Summarized
ID: 2388454 • Letter: W
Question
Which company appears more solvent? (Name a ratio used to determine.)
Summarized financial data for two competitors is set out below:
(All balances are as of 12/31/08 or for the year ended 12/31/08)
Oscar Corp
Felix Corp
Sales revenue
800,000
600,000
Total expenses
400,000
200,000
Cash
90,000
25,000
Accounts receivable
120,000
75,000
Property plant and equipment, net
250,000
225,000
Accounts payable
95,000
60,000
Salaries payable
75,000
35,000
Long term liabilities
150,000
75,000
Common shares outstanding, beginning of year
50,000
25,000
Common shares outstanding, end of year
100,000
40,000
No dividends were paid during 2008.
Summarized financial data for two competitors is set out below:
(All balances are as of 12/31/08 or for the year ended 12/31/08)
Oscar Corp
Felix Corp
Sales revenue
800,000
600,000
Total expenses
400,000
200,000
Cash
90,000
25,000
Accounts receivable
120,000
75,000
Property plant and equipment, net
250,000
225,000
Accounts payable
95,000
60,000
Salaries payable
75,000
35,000
Long term liabilities
150,000
75,000
Common shares outstanding, beginning of year
50,000
25,000
Common shares outstanding, end of year
100,000
40,000
No dividends were paid during 2008.
Explanation / Answer
DTI does it stand for debt to income ratio??
if debt to income ration, it can be calculated using the same formula as debt to assets ratio:Total liabilities / total assets
CA
210,000 100,000
LTA
250,000 225,000
Total assets
460,000 325,000
CL
170,000 95,000
LTL
150,000 75,000
Total liabiltiies
320,000 170,000
Total liabilities / total assets
Oscar DTI will be 69.6%
and Felix DTI will be 52.3%
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