Question

The following total liabilities and stockholders’ equity information (in millions) is provided for Papa John’s International, Inc. and Yum! Brands, Inc. at the end of a recent year: Papa John’s Yum! Brands Total liabilities $405 $6,732 Total stockholders’ equity 99 1,604 Yum! Brands is a much larger company than is Papa John’s, however both companies compete internationally in the fast food business. Papa John’s is primarily in the carry-out and delivery pizza business, while Yum! Brands is in the quick-service restaurant business with its Pizza Hut, Taco Bell, and KFC brands. a. Compute the ratio of liabilities to stockholders’ equity for each company. (Round to one decimal place.)

Answer 1

4.09

4.20

Explanation:

As per the data given in the question,

The liabilities and stockholders' equity ratio represents the relationship between the owner equity and liability. Moreover the Low ratio depicts that company has more ability to pay off the creditors liability or obligations

Ratio of liabilities to stockholders’ equity = Total liabilities ÷ Total owner's equity

For Company Papa john's international = $405 ÷ 99

= 4.09

For Company Yum! Brands = $6,732 ÷ 1,604

= 4.20