1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
OLEGan [10]
3 years ago
11

Your financial analyst calculated the following ratios for three companies: Boeing Microsoft PG&E Cash ratio 0.15 0.1 0.1 Cu

rrent ratio 1.3 2.5 0.8 Debt ratio 0.9 0.4 0.75 Profit margin 5% 28% 6% Evaluate the statement "Boeing is a riskier company than Microsoft and PG&E because of its higher debt ratio." Yes: A higher debt ratio of Boeing than that of PG&E is a sign of short-term illiquidity. Not necessarily: The debt ratios are not directly comparable, since each company is in a different industry. Yes: A higher debt ratio means that the company is less capable of paying interests.
Business
1 answer:
MaRussiya [10]3 years ago
7 0

Answer: Not necessarily: The debt ratios are not directly comparable, since each company is in a different industry.

Explanation:

We cannot authoritatively state that even though Boeing has such a high debt rate, that it is a riskier company than either Microsoft or PG&E. This is due to the drawback in ratio analysis of bias if compared across different industries.

Ratio analysis best works when comparing companies in the same industry because their situations will be similar. Comparing across industries can be misleading because different industries operate in different ways. In the Airplane manufacturing business for instance, having a high amount of debt due to having the tangible assets to back it up might be a normal thing.

The debt ratios are therefore not directly comparable because each company is in a different industry.

You might be interested in
The stockholders' equity section of Sheridan Company balance sheet at December 31, 2019, appears below:
dimulka [17.4K]

Answer:

Sheridan Company

1. Journal Entries:

Jan. 18 Debit Cash $1,920,000

Credit Common stock $800,000

Credit Paid-in capital in excess of par $1,120,000

To record the issuance of 80,000 shares of common stock at $24 per share.

Aug. 20 Debit Treasury stock $260,000

Debit Paid-in capital in excess of par $416,000

Credit Cash $676,000

To record the repurchase of 26,000 shares of Sheridan Company common stock at $26 per share to be held in the treasury.

Nov. 5 Debit Cash $1,600,000

Credit Common stock $500,000

Credit Paid-in capital in excess of par$1,100,000

To record the issuance of 50,000 shares of common stock at $32 per share.

2. Stockholders' Equity Section of Sheridan Company

Balance Sheet at December 31, 2019:

Paid-in capital

Common stock, $10 par value, 410,000 shares authorized;

330,000 issued and outstanding     $4,600,000

Paid-in capital in excess of par           3,054,000

Treasury stock                                      (260,000)

Total paid-in capital                             7,394,000

Retained earnings                                 900,000

Total stockholders' equity               $8,284,000

Explanation:

a) Data and Calculations:

Stockholders' Equity Section of Sheridan Company

Balance Sheet at December 31, 2019:

Paid-in capital

Common stock, $10 par value, 410,000 shares authorized;

330,000 issued and outstanding     $3,300,000

Paid-in capital in excess of par            1,250,000

Total paid-in capital                             4,550,000

Retained earnings                                  800,000

Total stockholders' equity                $5,350,000

b) Transaction Analysis:

Jan. 18 Cash $1,920,000 Common stock $800,000 Paid-in capital in excess of par $1,120,000

Aug. 20 Treasury stock $260,000 Paid-in capital in excess of par $416,000 Cash $676,000

Nov. 5 Cash $1,600,000 Common stock $500,000 Paid-in capital in excess of par$1,100,000

Common stock:

Dec. 31, 2019:  330,000 issued and outstanding     $3,300,000

Jan. 18, 2020:    80,000 issued of new shares             800,000

Nov. 5, 2020:    50,000 issued of additional shares    500,000

Dec. 31, 2020: 460,000 issued and outstanding    $4,600,000

Paid-in capital in excess of par

December 31, 2019            $ 1,250,000

Jan. 18 issue                           1,120,000

Aug. 20 treasury stock           (416,000)

Nov. 5 issue of new shares  1,100,000

December 31, 2020          $3,054,000

Retained Earnings:

December 31, 2019    $800,000

Net income for 2020    100,000

December 31, 2020  $900,000

6 0
3 years ago
Which two groups are the primary actors in collective bargaining negotiations?
e-lub [12.9K]

Answer:

Hi The answer is labor and management.

3 0
3 years ago
Read 2 more answers
Which underlined phrase is a perfect participial phrase? recreation areas are divided into three categories, indicating the main
Tomtit [17]
Since there are no indicated phrases that are underlined, I had to choose which sentence contains the perfect participle phrase and that would be sentence 2: Having determined a need to offer opportunities for sports and leisure activities, the city created several recreation areas. The perfect participle phrase in this sentence is this: Having determined a need to offer opportunities for sports and leisure activities.
3 0
3 years ago
Read 2 more answers
A car plant used to produce 10 cars a day. With new technology, the same plant now produces 20 cars a day. The plant has increas
algol [13]
The plant as increased its production:
As it can make more than before, this means also that the plant is more efficient.
Hope this helps
4 0
3 years ago
Read 2 more answers
Mission Foods produces two flavors of tacos, chicken and fish, with the following characteristics:
Alex17521 [72]

Answer:

$1,059,050

Explanation:

The computation of the anticipated level of profits for the expected sales volumes is shown below:

Expected sales             209,000                      305,000

Particulars                     Chicken                          Fish

Sales                              $815,100                       $1,525,000

Less:

Variable cost                -$407,550                     -$762,500

Contribution margin      $407,550                      $762,500

Now the profit would be

= Total contribution margin - total fixed cost

= $407,550 + $762,500 - $111,000

= $1,059,050

The sales are variable cost are come by multiplying the units with its price per taco.

4 0
3 years ago
Other questions:
  • Consider the $50,000 excess cash.Assume that Gary invests the funds in a one year CD
    15·1 answer
  • In a small open economy, starting from a position of balanced trade, if the government increases domestic government purchases,
    6·1 answer
  • Paying taxes to governmental bodies is considered a cash outflow in the operating activities section on the statement of cash fl
    5·1 answer
  • For the year ending December​ 31, 2018, Sparks Electric expects net cash provided by operations of $ 328, 000​, net cash used by
    6·1 answer
  • A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than
    8·1 answer
  • Which action can hurt your credit score? I. Paying your phone bill late. II. Taking the bus to work. III. Maxing out several cre
    6·2 answers
  • Why are so many people on brainly weird.
    15·1 answer
  • ou own a portfolio that is 30 percent invested in Stock X, 20 percent in Stock Y, and 50 percent in Stock Z. The expected return
    9·1 answer
  • what are the typical interest rates for a traditional savings account, online savings account, certificate of deposit, and money
    11·1 answer
  • Crystal Corporation makes $2,300 payments every month for leasing office equipment. Crystal recorded a lease payment as follows:
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!