Comparative Analysis Required 1. Compute the debt-to-equity ratio for Apple and

Question

Comparative Analysis

Required

1. Compute the debt-to-equity ratio for Apple and Googlefor both the current year and the prior year.

2. Use the ratios you computed in part 1 to determine which company's financing structure is least risky. Assume an industry average of 0.44 for debt-to-equity.

Ethics Challenge

Required

1. Do you think the actions of the politians and the bankers in this situation are ethical?

2. In terms of risk, how do the tax-exempt securities used to pay for the building compare to a conventional municipal bond issued by Traverse County.

COMPARATIVE ANALYSIS A3 BTN 10-2 Key figures for Apple and Google follow APPLE GOOGLE Apple Google Prior Year $93,798 22,083 71,715 Current Year Prior Year Current Year ($ mllilons) Total assets. Total labilities Total equity $207,000 83.451 123,549 $176,064 57,854 118,210 $110,920 23.611 87.309 Required 1. Compute the debt-to-equity ratios for Apple and Google for both the current year and the pior vear 2. Use the ratios you computed in part 1 to determine which company's financing structure is least risky. Assume an industry average of 0.44 for debt-to-equity ETHICS CHALLENGE C4 A1 BTN 10-3 Traverse County needs a new county government building that would cost $10 million. The politicians feel that voters will not approve a municipal bond issue to fund the building since it would increase taxes. They opt to have a state bank issue $10 million of tax-exempt securities to pay for the building construction. The county then will make yearly lease payments (of principal and interest) to repay the obligation. Unlike conventional municipal bonds, the lease payments are not binding obligations on the county and, therefore, require no voter approval Required 1. Do you think the actions of the politicians and the bankers in this situation are ethical? 2. In terms of risk, how do the tax-exempt securities used to pay for the building compare to a conventional municipal bond issued by Traverse County?

Explanation / Answer

Comparative Analysis

1. Debt to Equity Ratio = Total Liabilities/Total Assets

For Apple, Current Year = 83,451/123,549 = 0.68

For Apple, Previous Year = 57,854/118,210 = 0.49

For Google, Current Year = 23,611/87,309 = 0.27

For Google, Previous Year = 22,083/71,715 = 0.31

2. A high debt to equity ratio means that a company has been financing more with debt component which are often associated with high levels of risk. Assuming average debt to equity ratio of Industry is 0.44, Google is less riskier than Apple due to its low debt to equity ratio which is 0.27 when compared to 0.68.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.