io of liabilities to stockholders\' equity and ratio of fixed assets to Obj 2 v
ID: 2589493 • Letter: I
Question
io of liabilities to stockholders' equity and ratio of fixed assets to Obj 2 v a. H.J. Heinz, 3.3 long-term liabilities balance sheet information for two companies in the food industry, HJ. Heinz Company aol The Hershey Company, is as follows Gin millions of dollars) HJ. Heinz Hershey Net property, plant, and equipment Current liabilities Long-term debt Other long-term liabilities Stockholders' equity $2,484 2,648 4,780 1,683 2,759 $1,560 1,174 ,749 641 849 a. Determine the ratio of liabilities to stockholders' equity for both companies. Round to one decimal place b. Determine the ratio of fixed assets to long-term liabilities for both companies. Round to two decimal places c Interpret the ratio differences between the two companies.Explanation / Answer
a.
b.
c.
From the first ratio we can conclude that Hershey is financed more by debt than H.J.Heinz.
If the company is unable to generate enoughreturn on the capital employed , Hershey is at a higher risk of defaulting in payment of its liabilities than H.j. Heinz. Both the companies are depending more on borrowed funds than internally generated funds.
The second ratio gives an important picture, which shows that Hershey is financing fixed assets more by long term borowing than H.J.Heinz. Hienz is using higher percentage of long term debt for financing current assets than Hershey. It also shows that security provided to long term debt is higher for Hershey than H.J.Heinz.
H.J.Heinz Hershey Liabilities to stockholders' equity 330% 420%Related Questions
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