Question

Recent financial statement data for Harmony Health Foods (HHF) Inc. is shown below. Current liabilities $ 180 Income before interest and taxes $ 125 10% Bonds, longterm 360 Interest expense 36 Total liabilities 540 Income before tax 89 Shareholders' equity Income tax 27 Capital stock 200 Net income $ 62 Retained earnings 280 Total shareholders' equity 480 Total liabilities and equity $1,020 HHF's long-term debt to equity ratio equity is:
A. 133.3%.

B. 75%.

C. 180%.

D. 0%.

Answer 1

Answer:

B. 75%.

Explanation:

The formula to compute the long-term debt to equity ratio is shown below:

= (Long term debt) ÷ (total shareholder equity) × 100

= ($360 ÷ $480) × 100

= 75%

All other information which is given in the question is not consider for the computation part. Hence, ignored it

We simply divide the long term debt with the total shareholder equity to find out the ratio between them