Question

The total debt and stockholders' equity for three companies follows. The companies are described as follows (Click the icon to view the total debt and stockholders' equity data.) Requirements 1. Compute debt-to-equity ratios for each company for 2004 and 2011 2. Discuss the differences in the ratios across firms. SG Northern is a multinational technology and services company and is a large, well-established company. Stratton Global is a fast-growing company focusing on Internet search. Seely National is a biotechnology company pioneering the development of 3. Discuss the changes in individual company ratios from 2004 to 2011 products based on advances in recombinant DNA. Requirement 1. Compute debt-to-equity ratios for each company for 2004 and 2011. (Round your answers to two decimal places.) Debt-to-Equity Ratios 2011 2004 SG Northern Stratton Global Seely National Requirement 2. Discuss the differences in the ratios across firms earnings are relatively stable. Therefore, they have the ability to borrow large amounts, as shown are newer, smaller companies in by the debl-to-equitly ratio volatile high-tech industries. They have not yet established the credit worthiness to borrow as much as Requirement 3. Discuss the changes in individual company ratios from 2004 to 2011 and over the four-year period For many firms can have a immediate effect on the ratios If a company increased its Data Table its debt-to-equity ratio, this indicates that Total Debt Stockholders' Equity (in millions) 2011 2004 2011 2004 SG Northern Stratton Global Seely National S 682,500 S 619,500 S 103,000 S 112,500 500 22,000 2,550 305 22,500 16,400 9,450 17,500 Print Done

Answer 1

Soln : Please refer here the table for Debt to equity :

	Debt		Equity		Debt/equity
	2011	2004	2011	2004	2011	2004
SG Northern	682500	619500	103000	112500	6.63	5.51
Stratton Global	2550	305.00	22500.00	500.00	0.11	0.61
Seely national	16400.00	9450.00	17500.00	22000.00	0.94	0.43

2) Differences in the ratios:

SG northern earnings are relatively stable . Therefore , they have the ability to borrow large amounts s hown by the 2011 debt to equity ratio. Stratton Global and Seely National are newer and smaller companies in volatile high-tech industries. They have not yet established the credit worthiness to borrow as much as SG Northern.

Requirement 3 :

Debt to equity ratio over the seven year period has increased/decreased , for many firms change in borrowing can have a large immediate effect on the ratios.

If a company increased its debt to equity ratio , this indicated that company is expanding and leveraging their money. If a company decreased its debt to equity ratio, this indicates that company is in stable/mature stage.