Ratio of liabilities to stockholders’ equity and number of times interest

Charges are earned

Hasbro 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 com- pany as follows (in   thousands):

 

Â	Hasbro	Mattel
Current liabilities	$   960,435	$ 1,716,012
Long-term debt	1,396,421	1,100,000
Deferred liabilities	      461,152	        643,729
Total liabilities Shareholders’ equity:	$ 2,818,008	$ 3,459,741
Common stock	$   104,847	$    441,369
Additional paid in capital	655,943	1,727,682
Retained earnings	3,354,545	3,515,181
Accumulated other comprehensive loss and other equity items	(72,307)	(464,486)
Treasury stock, at cost	 (2,535,649)	  (2,152,702)
Total  stockholders’ equity	$ 1,507,379	$ 3,067,044
Total liabilities and stockholders’ equity	$ 4,325,387	$ 6,526,785

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

 

 

Â	Hasbro	Mattel
Income from operations (before income  tax)	$453,402	$945,045
Interest expense	117,403	88,835

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

b.    Determine the number of times interest charges are earned for both companies. Round to one decimal place.

c.                              Interpret the ratio differences between the two companies.