Question

# Subject: BUSINESS POLICY Q3 a For each company listed below, compute the debt ratio, which reveals...

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.

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.