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Calculate the debt to total assets ratio for both companies

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Reference no: EM132604136

The balance sheets of two competing companies in the same industry are provided below. The companies have approximately the same volume of sales and similar operating capacities.

                                                                Balance Sheets

                                                        Alpha Co.                         Beta Co.

Assets:

??Current assets                             $ 218,000                   $200,000

Property plant, and equipment             1,090,000                825,000

Accumulated depreciation                        (279,000)               (425,000)

Total assets $ 1,029,000 $600,000???

Liabilities and shareholders' equity??:

Current liabilities                                          $ 103,000               $ 28,000

Non- current liabilities                                $611,000                $ 150,000

Share capital                                            $ 100,000                  $150,000

Retained earnings                                         215,000                        572,000

Total liabilities and shareholders' equity          $1,029,000                  $600,000

Instructions

Question 1: Calculate the debt to total assets ratio for both companies. Which company is more solvent?

Question 2: Based on the information provided, can horizontal analysis be used to determine which company is more profitable?

Reference no: EM132604136

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