Homework SourseThe following information has been condensed from the Decemb
The following information has been condensed from the December 31 balance sheets of Angel Co.:
Year 2
Year 1
Assets:
Current assets
$ 725,500
$ 674,300
Fixed assets (net)
1,473,600
1,275,300
Total assets
$2,199,100
$1,949,600
Liabilities:
Current liabilities
$ 313,500
$ 309,600
Long-term liabilities
703,000
545,000
Total liabilities
$1,016,500
$ 854,600
Stockholders\' equity
$1,182,600
$1,095,000
Total liabilities and
stockholders\' equity
$2,199,100
$1,949,600
(a) Determine the ratio of fixed assets to long-term liabilities for each year.
(b) Determine the ratio of liabilities to stockholders\' equity for each year.
(c) Comment on the year-to-year changes for both ratios. Round your answers to two decimal places.
Show work
| Year 2 | Year 1 | |
| Assets: | ||
| Current assets | $ 725,500 | $ 674,300 |
| Fixed assets (net) | 1,473,600 | 1,275,300 |
| Total assets | $2,199,100 | $1,949,600 |
| Liabilities: | ||
| Current liabilities | $ 313,500 | $ 309,600 |
| Long-term liabilities | 703,000 | 545,000 |
| Total liabilities | $1,016,500 | $ 854,600 |
| Stockholders\' equity | $1,182,600 | $1,095,000 |
| Total liabilities and | ||
| stockholders\' equity | $2,199,100 | $1,949,600 |
Solution
Comment
A) The fixed asset to liability ratio higher is better. The ratio has fallen as compare to last year because of we have purchased the new fixed assets but at the same time we have acquired the loan also.
B) liabilty to equity ratio lower the better, because liabilites has to be paid compulsorly and higher the liability may create liquidity problem.
| Particular | year 2 | year 1 |
| A) fixed assets | 1473600 | 1275300 |
| B) long term liabilities | 703000 | 545000 |
| C) fixed assets to long term liabilities ratio(a/b) | 2.10 | 2.34 |
| D)Total liabilities | 1016500 | 854600 |
| E) shareholder equity | 1182600 | 1095000 |
| F) liability to shareholder equity(d/E) | 0.86 | 0.78 |
