Question

Subject: BUSINESS POLICY

Q3 a

For each company listed below, compute the debt ratio, which reveals the proportion of assets financed with debt. Debt ratio =Total liabilities / Total assets

($ in Millions)	Date	Total Assets	Total Liabilities	Debt Ratio
Miscrosoft (MSFT)	6/30/2008	$72,793	$36,507	50.15%
Wal-Mart Stores (WMT)	1/31/2009	$163,429	$98,144
Ford Motor Company (F)	12/31/2008	$218,328	$235,639

Q3 b.

Wal-Mart is primarily financed with (debt / equity), resulting in a debt ratio that is (less / more) than 50.00%, while a company primarily financed with equity will have a debt ratio that is (lessI more) than 50.00%. Ford has a debt ratio greater than (50%/100%), indicating its liabilities are (greater /Iess) than its assets.

Answer 1

3-a)

($ in Millions)	Date	Total Assets	Total Liabilities	Debt Ratio
Miscrosoft (MSFT)	6/30/2008	$72793	$36507	50.15%
Wal-Mart Stores (WMT)	1/31/2009	$163429	$98144	60.05%
Ford Motor Company (F)	12/31/2008	$218328	$235639	107.93%

Wal-Mart Stores (WMT)

Debt ratio= $98144*100/163429= 60.05%

Ford Motor Company (F)

Debt ratio= $235639*100/218328= 107.93%

3-b) Wal-Mart is primarily financed with debt, resulting in a debt ratio that is more than 50.00%, while a company primarily financed with equity will have a debt ratio that is less than 50.00%. Ford has a debt ratio greater than 100%, indicating its liabilities are greater than its assets.