io of liabilities to stockholders\' equity and ratio of fixed assets to Obj 2 v
ID: 2589502 • 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.
Ratio of Liabilities to Stockholder’s equity = Total Liabilities / Shareholder’s equity
= (Current liab. + Long term debt + other long term liabilities) / Shareholder’s equity
H.J. Heinz = (2,648 + 4,780 + 1,683) / 2,759
H.J. Heinz = 3.30
Hershey = (1,174 + 1,749 + 641) / 849
Hershey = 4.2
B.
Fixed Assets to long term liabilities = Fixed Assets / Long term Liability
= Fixed Assets / (Long term debt + other long term liabilities)
H.J. Heinz = 2,484 / (4,780 + 1,683)
H.J. Heinz = 0.38
Hershey =1,560 / (1,749 + 641)
Hershey = 0.65
C.
Heinz has low liabilities to stockholders’ ratio, which is good for investors point of view as they have less debt percentage to equity than Hershey.
Whereas Hershey has performed well in Fixed assets to liabilities ratio as they have less debt percentage of fixed assets which is good from investors point of view.
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