Question

1. Compute the leverage ratio for XCO and two liquidity ratios for 2020

Balance Sheet on January 31 ($ millions)
	2018			2019	2020
Inventory		2,254		2,428	2,464		Inventory
Acc Rec		231		245	240		Acc Rec
Other		207		231	274		Other
Cash		1,291		855	897		Cash
Current Assets	3,983			3,760	3,876		Current Assets
NPPE	991			1,027	2,202		NPPE
Other F.A.	494			547	583		Other F.A.
Total F.A.	1,485			1,574	2,785		Total F.A.
Total Assets	5,468		5,333		6,660		Total Assets
S.T. Debt	121		113		351		S.T. Debt
Accs Payable	202		217		261		Accs Payable
Other	403		388		358		Other
Total C.L.	725		718		970		Total C.L.
L.T. Debt	883		883		884		L.T. Debt
Other	612		601		1,470		Other
Total L.T.	1,495		1,484		2,354		Total L.T.
Common Eq	3,248		3,131		3,335		Common Eq
Total L&E	5,468		5,333		6,660		Total L&E

Answer 1

Two Liquidity Ratios for XCO:

Given:

( in million)

2018 : Current Assets= 3,983   Current Liabilities= 725 Inventory=2,254

2019 : Current Assets= 3,760   Current Liabilities=718 Inventory= 2,428

2020: Current Assets= 3,876   Current Liabilities= 970  Inventory= 2,464

1. Current Ratio= current assets / current liabilities

2018 :

Current Ratio = 3,983 / 725

= 5.4 times

2019 :

Current Ratio = 3,760 / 718

= 5.23 times

2020:

Current Ratio = 3,876/ 970

= 3.99 times

2. Quick Ratio = (current assets – inventory) / current liabilities

2018:

Quick Ratio = (3,983 – 2,254) / 725

= 1729 / 725

= 2.38 times

2019:

Quick Ratio = (3,760 – 2,464) / 718

= 1332 / 718

= 1.85 times

2020:

Quick Ratio = (3,876 – 2,254) / 970

= 1622 / 970

= 1.67 times

Leverage Ratios:

Below are 5 of the most commonly used leverage ratios:

1. Debt-to-Assets Ratio = Total Debt / Total Assets
2. Debt-to-Equity Ratio = Total Debt / Total Equity
3. Debt-to-Capital Ratio = Total Debt / (Total Debt + Total Equity)
4. Asset-to-Equity Ratio = Total Assets / Total Equity

2018:

Given:

( in million)

Total Asset= 5,468
Total Debt= total CL + total L.T = 725+1495 = 2,220
Total Equity= 3,248
Total Debt + Total Equity= 5,468

Debt-to-Assets Ratio = Total Debt / Total Assets

= 2,220 / 5,468

= 0.40 times

Debt-to-Equity Ratio = Total Debt / Total Equity

= 2,220 / 3,248

= 0.68 times

Debt-to-Capital Ratio = Total Debt / (Total Debt + Total Equity)

= 2,220 / 5,468

= 0.40 times

Asset-to-Equity Ratio = Total Assets / Total Equity

= 5,468 / 3,248

= 1.68 times

2019:

Given:

( in million)

Total Asset= 5,333
Total Debt= total CL + total L.T = 718+1484 = 2,202
Total Equity= 3,131
Total Debt + Total Equity= 5,333

Debt-to-Assets Ratio = Total Debt / Total Assets

= 2,202 / 5,333

= 0.41 times

Debt-to-Equity Ratio = Total Debt / Total Equity

= 2,202 / 3,131

= 0.70 times

Debt-to-Capital Ratio = Total Debt / (Total Debt + Total Equity)

= 2,202 / 5,333

= 0.41 times

Asset-to-Equity Ratio = Total Assets / Total Equity

= 5,333 / 3,131

= 1.70 times

2020:

Given:

( in million)

Total Asset= 6,660
Total Debt= total CL + total L.T = 970+2354 = 3,324
Total Equity= 3,335
Total Debt + Total Equity= 6,660

Debt-to-Assets Ratio = Total Debt / Total Assets

= 3,324 / 6,660

= 0.49 times

Debt-to-Equity Ratio = Total Debt / Total Equity

= 3,324 / 3,335

= 0.99 times

Debt-to-Capital Ratio = Total Debt / (Total Debt + Total Equity)

=3,324 / 6,660

= 0.49 times

Asset-to-Equity Ratio = Total Assets / Total Equity

= 6,660 / 3,335

= 1.99 times