2Year 2 1Year 1 Assets: Current assets $ 825,500 $ 674,300 Fixed assets (net) 1,

Question

2Year 2 1Year 1 Assets: Current assets $   825,500 $   674,300 Fixed assets (net)   1,473,600   1,275,300 Total assets $2,299,100 $1,949,600 Liabilities: Current liabilities $   313,500 $   309,600 Long-term liabilities      703,000 545,000 Total liabilities $1,016,500 $ 854,600 Stockholders' equity $1,282,600 $1,095,000 Total liabilities and   stockholders' equity $2,299,100 $1,949,600 (a) Determine the ratio of fixed assets to long-term liabilities for each year. (b) Determine the ratio of liabilities to stockholders' equity for each year. (c) Comment on the year-to-year changes for both ratios.

Explanation / Answer

a) Fixed assets/long term laibilites

Year 1:=1275300/545000=2.34

Year 2=1473600/703000=2.10

b) Total liabilites/total stockholder equity

Year 1=854600/1949600=0.44

Year 2=1016500/2299100=0.44

c) fixed assets to long-term liabilities decreased in year 2 compared to year 1 while ratio of liabilities to stockholders' equity remained samed in both the years

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