Asked by rejina kristin on May 16, 2024
Verified
The following data were taken from Miller Company's balance sheet: Dec. 31, Year 2 Dec. 31, Year 1 Total liabilities $150,000$105,000 Total owner’s equity 75,00060,000\begin{array}{lcc} & \text { Dec. 31, Year } 2 & \text { Dec. 31, Year 1 } \\\text { Total liabilities } & \$ 150,000 & \$ 105,000 \\\text { Total owner's equity } & 75,000 & 60,000\end{array} Total liabilities Total owner’s equity Dec. 31, Year 2$150,00075,000 Dec. 31, Year 1 $105,00060,000 (a) Compute the ratio of liabilities to owner's equity. Round your answer to one decimal place.
(b) Has the creditors' risk increased or decreased from December 31, Year 1, to December 31, Year 2?
Liabilities
Financial obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.
Owner's Equity
Owner's equity represents the owner's claims on the assets of the business, calculated as total assets minus total liabilities.
Creditors' Risk
The level of risk that creditors face regarding the possibility of not receiving back the principal and/or interest on loans issued to borrowers.
- Examine and understand fiscal documents to determine the financial well-being of an organization.
- Compute and analyze fiscal ratios to evaluate liquidity, financial stability, and profit generation.
Verified Answer
CB
Christian BravoMay 17, 2024
Final Answer :
(a) 12/31/Year 2: $150,000/$75,000 = 2.012/31/Year 1: $105,000/$60,000 = 1.8
(b) Increased
(b) Increased
Learning Objectives
- Examine and understand fiscal documents to determine the financial well-being of an organization.
- Compute and analyze fiscal ratios to evaluate liquidity, financial stability, and profit generation.