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
For each of the users of accounting​ information, identify whether the user is an external decision maker​ (E) or an internal de
REY [17]

Answer:

Four of the concepts are external decision makers and the other four are internal decision makers.

Explanation:

a. customer E

b. pany manager I

c. Internal Revenue Service I

d. lender E

e. investor E

f. controller I

g. cost accountant I

h. SEC E

3 0
3 years ago
A blackboard used during a presentation would NOT be considered a visual aid<br><br> true<br> false
Tresset [83]

falsehbbguwknbh iigggvow jiw

5 0
3 years ago
Checking a credit report is a good way to
tangare [24]
I think its A cuz its about good or bad credit all the time
7 0
2 years ago
Read 2 more answers
Jasper makes a $25,000, 90-day, 7% cash loan to clayborn co. jasper's entry to record the collection of the note and interest at
Irina-Kira [14]

Answer:

The journal entry is as follows:

Cash A/c Dr. $ 25,437.50

      To Notes Receivable A/c   $25,000

      To Interest revenue A/c     $437.50

(To record the collection of the note and interest at maturity)

Working notes:

Interest for 90 Days:

= Note value × Interest rate × Time period

= $25,000 × 0.07 × (90/360) days

= $437.50

5 0
3 years ago
What are the advantages of electronic communication
fiasKO [112]

Answer:

IT HEPLS TO SOLVE ECONOMIC PROBLEMS ABOUT TRADITIONAL SUPERSTATION

5 0
3 years ago
Read 2 more answers
Other questions:
  • If the economy is normal, Charleston Freight stock is expected to return 16.5 percent. If the economy falls into a recession, th
    9·1 answer
  • The company purchases equipment with cash - The Equity account does the following:
    5·1 answer
  • A popular sports company grants a license to people who use their logo on T-shirts and caps. They charge the company for the rig
    5·2 answers
  • Cartersville Co. reports the following data:
    12·1 answer
  • Benefit of family buisness​
    5·1 answer
  • As workers demand higher wages to produce automobiles, how will this influence the automobile market?
    10·1 answer
  • Last night 45,000 people bought 6,000 shirts. The shirts cost $8.00 dollars each. How much did they spend all togther?
    12·2 answers
  • The Levi Company issued $90,000 of 6% bonds on January 1 of the current year at face value. The bonds pay interest semiannually
    13·1 answer
  • What is the role of debt is the pecking order theory of capital structure? How does it differ under the stulz (1990) model?
    12·1 answer
  • The​ product/market expansion grid is a tool that allows marketers to identify growth opportunities. Of the​ following, which re
    10·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!