The following information was taken from Chaff Company’s balance sheet: Fixed assets (net)

Accounting Jan 22, 2021

The following information was taken from Chaff Company’s balance sheet:
Fixed assets (net).............$1,000,000
Long-term liabilities........... 625,000
Total liabilities............. 840,000
Total stockholders’ equity......... 600,000
Determine the company’s
(a) Ratio of fixed assets to long-term liabilities and
(b) Ratio of liabilities to stockholders’ equity.

Expert Solution

a. Ratio of Fixed Assets to Long-Term Liabilities = Fixed Assets /

Long-Term Liabilities

Ratio of Fixed Assets to Long-Term Liabilities = $1,000,000 / $625,000

Ratio of Fixed Assets to Long-Term Liabilities = 1.6

b. Ratio of Liabilities to Stockholders' Equity =Total Liabilities / Total

Stockholders' Equity

Ratio of Liabilities to Stockholders' Equity = $840,000 / $600,000

Ratio of Liabilities to Stockholders' Equity = 1.4

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