Given the Following Data

question 165

Essay

Given the following data:
Dec. 31, Year 2 Dec. 31, Year 1
Total liabilities $128,250 $120,000
Total stockholders' equity 95,000 80,000
(a) Compute the ratio of liabilities to stockholders' equity for each year. Round your answer to two decimal places.
(b) Has the creditors' risk increased or decreased from December 31, Year 1, to December 31, Year 2?

---

Definitions:

Break-even Point

The point at which total cost and total revenue are equal, meaning there is no profit or loss.

Average Total Cost (ATC)

Total cost divided by output.

Average Variable Cost (AVC)

Variable cost divided by output.

Average Total Cost

The total cost of production divided by the quantity produced, indicating the average cost per unit of output.