Company G has a ratio of liabilities to stockholders' equity of 0.12 and 0.28 for Year 1 and Year 2, respectively. In contrast, Company M has a ratio of liabilities to stockholders' equity of 1.13 and 1.29 for the same period.REQUIRED:Based on this information, which company's creditors are more at risk and why? Should the creditors of either company fear the risk of nonpayment?

Question

Company G has a ratio of liabilities to stockholders' equity of 0.12 and 0.28 for Year 1 and Year 2, respectively. In contrast, Company M has a ratio of liabilities to stockholders' equity of 1.13 and 1.29 for the same period.​REQUIRED:Based on this information, which company's creditors are more at risk and why? Should the creditors of either company fear the risk of nonpayment?

Quizplus · Accepted Answer

The Answer of Company G has a ratio of liabilities to stockholders' equity of 0.12 and 0.28 for Year 1 and Year 2, respectively. In contrast, Company M has a ratio of liabilities to stockholders' equity of 1.13 and 1.29 for the same period.​REQUIRED:Based on this information, which company's creditors are more at risk and why? Should the creditors of either company fear the risk of nonpayment?

Company G Has a Ratio of Liabilities to Stockholders' Equity