Question

Suppose McDonald’s 2017 financial statements contain the following selected data (in millions).

Current assets		$3,380.0		Interest expense		$470.0
Total assets		29,030.0		Income taxes		1,829.0
Current liabilities		2,940.0		Net income		4,437.0
Total liabilities		15,386.0

Compute the following values.

1.		Working capital.		$	millions
2.		Current ratio. (Round to 2 decimal places, e.g. 6.25:1.)			:1
3.		Debt to assets ratio. (Round to 0 decimal places, e.g. 62%.)			%
4.		Times interest earned. (Round to 2 decimal places, e.g. 6.25.)			times

eTextbook and Media

Suppose the notes to McDonald’s financial statements show that subsequent to 2017 the company will have future minimum lease payments under operating leases of $18,574.0 million. If these assets had been purchased with debt, assets and liabilities would rise by approximately $9,399 million. Recompute the debt to assets ratio after adjusting for this. (Round answer to 0 decimal places, e.g. 62%.)

Debt to assets ratio

Type your answer here %

eTextbook and Media

Answer 1

AR C D E F Current assets Total assets Current liabilities Total liabilities $3,380 $ 29,030 $ 2,940 $ 15,386 Interest expense Income taxes Net income $470 $ 1,829 $4,437 millions Working capital. Current ratio. Debt to assets ratio. Times interest earned. $ 440 1.15 53% 14.33 formula Current assets - Current liabilities Current assets / Current liabilities Total liabilities/ Total assets | Earning before Interest expense and Tax expense / Interest expense 4 times Revised Total liabilities Revised Total assets $ 24,785 $ 38,429 Debt to assets ratio 64%

for formulas and calculations, refer to the image below -

X for 1 н Current assets Total assets Current liabilities Total liabilities 3380 29030 2940 15386 Interest expense 470 Income taxes 1829 Net income 4437 11 millions 2 Working capital. =D2-D4 Current ratio. =D2/D4 Debt to assets ratio. =D5/D3 Times interest earned. =(F4+F3+F2/F2 formula Current assets - Current liabilities Current assets / Current liabilities Total liabilities/ Total assets Earning before Interest expense and Tax expense / Interest expense 3 4 times | Revised Total liabilities =15386+9399 Revised Total assets =29030+9399 Debt to assets ratio =D13/D14

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