Question

Succeed's Companies, a home improvement store chain, reported the following summarized figures: (Click the icon to view the income statement.) (Click the icon to view the balance sheets.) Succeed's has 50,000 common shares outstanding during 2018 Read the requirements Requirement 1. Compute the debt ratio and the debt to equity ratio at May 31, 2018, for Succeed's Companies Begin by selecting the formula to calculate Succeed's Companies' debt ratio. Then enter the amounts and calculate the debt ratio for 2018. (Round the ratio to one tenth of a percent. X X%) Debt ratio

Answer 1

Income Statement
	2018	2017
Sales	41000	38800
COGS	22500	28600
Interest Expense	500	280
Other Expense	7500	7800
Net Income	10500	2120

Balance Sheet
	2018	2017
Cash	2000	1700
Short Term Investment	29000	14000
Accounts Receivable	7200	5600
Merchandise Inventory	7200	7200
Other Current Assets	10000	2500
Total Current Assets	55400	31000
All Other Assets	30000	29000
Total Current Liabilities	27000	13100
Long Term Liabilities	12900	11700
Total Liabilities	39900	24800
Common Stock	11000	11000
Retained Earning	34500	24200
Total Equity	45500	35200
Total Liabilities and Equity	85400	60000

Debt Ratio =  Total Liabilities / Total Assets

Year	2018
Total Current Assets	55400
All Other Assets	30000
Total Assets (Total Current Assets+ All Other Assets)	85400
Total Liabilities	39900
Debt Ratio (Total Liabilities/Total Assets)	46.7%

So Debt Ratio = 39900/85400 = 46.7% for year 2018 (Ans)

Debt Equity Ratio =  Total Debt / Total Equity

Total Liabilities (Total Debt)	39900
Total Equity	45500
Debt Equity Ratio	0.88

So Debt Equity Ratio = 39900/85400 = 0.88 for year 2018 (Ans)

Debt Ratio 46.7% describe for $46.7 Debt Company having $100 Total Assets. The lower it is healthier the company is. As compare to industry average 69.2% the company has quite a low Debt Ratio.

Debt Equity Ratio 0.88 Describe the company owes $ 88 against its own capital of $ 100. The lower debt-equity ratio always depicts company is lower leveraged. As compared to Industry average 2.23 this firm has fairly low leverage.

This means its ability to pay liabilities is stronger since the debt ratio is fairly lesser. (Ans)