Hasbro, Inc. (HAS), and Mattel, Inc. (MAT), are the two largest toy companies in North America....
Hasbro, Inc. (HAS), and Mattel, Inc. (MAT), 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 | $1,617,859 | $1,505,573 | |||
| Long-term debt | 1,588,067 | 2,580,439 | |||
| Total liabilities | $3,205,926 | $4,086,012 | |||
| Total stockholders’ equity | $1,862,736 | $2,407,782 | |||
| Total liabilities and stockholders’ equity | $5,068,662 | $6,493,794 | |||
The operating income and interest expense from the income statement for each company were as follows (in thousands):
| Hasbro | Mattel | |||
| Operating income (before income tax expense) | $692,489 | $409,472 | ||
| Interest expense | 97,405 | 95,118 | ||
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. |
c. Together, these ratios indicate that earnings are more than enough to make interest payments. With that said, Hasbro does provide creditors with a greater margin of safety than Mattel.
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Hasbro, Inc. (HAS), and Mattel, Inc.
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