Question

Ratio of Liabilities to Stockholders' Equity and Times Interest Earned

Hasbro, Inc. and Mattel, Inc., are the two largest toy companies in North America. Condensed liabilities and stockholders' equity from a recent balance sheet are shown for each company as follows (in thousands):

		Hasbro		Mattel
Liabilities:
Current liabilities		$2,742,000		$4,818,000
Long-term debt		1,476,000		1,912,000
Other liabilities		_		918,000
	Total liabilities	$4,218,000		$7,648,000
Shareholders' equity:
	Common stock	$191,000		$860,000
	Additional paid in capital	591,000		3,155,000
	Retained earnings	3,675,000		3,251,000
	Accumulated other comprehensive
	income (loss) and other equity items	42,000		(526,000)
Treasury stock, at cost		(1,687,000)		(1,960,000)
Total stockholders' equity		$2,812,000		$4,780,000
Total liabilities and stockholders' equity		$7,030,000		$12,428,000

The income from operations and interest expense from the income statement for both companies were as follows (in thousands):

	Hasbro		Mattel
Income from operations (before income tax)	$977,220		$2,821,490
Interest expense	80,100		237,100

a. Determine the ratio of liabilities to stockholders' equity for both companies. Round to one decimal place.

Hasbro, Inc.
Mattel Inc.

b. Determine the times interest earned ratio for both companies. Round to one decimal place.

Hasbro, Inc.
Mattel Inc.

Answer 1

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Part a
		Hasbro	Mattel
Total Liabilities	a	$   4,218,000	$   7,648,000
Total Stockholder's Equity	b	$   2,812,000	$   4,780,000
Liabilities to stockholder Equity	a/b	1.50	1.60
Part b
Income from operation before tax	a	$       977,220	$   2,821,490
Interest Expense	b	$         80,100	$       237,100
Subtotal	a+b=c	$   1,057,320	$   3,058,590
Time interest Earned	c/b	13.20	12.90