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Unformatted text preview: 200 Beg. 300 Beg. 2,000 (a) 200 End. 2,300 End. Contributed Capital Retained Earnings 5,000 Beg. 2,000 Beg. (d) 300 5,000 End. 1,700 End. Req. 3 Assets $ 9,200 = Liabilities $ 2,500 + Stockholders Equity $ 6,700 Req. 4 Financial = Average Total Assets = ($7,500+$9,200) / 2 = $8,350 = 1.22 Leverage Average Stockholders Equity ($7,000+$6,700) / 2 $6,850 This ratio indicates that, for every $1 of equity investment, Massimo maintains $1.22 of assets. Massimos ratio is lower than the industry average of 2.00, indicating that Massimo maintains a lower debt level and follows a less risky financing strategy than does the average firm in the industry. As such, Massimo can finance expansion by borrowing without taking on excessive debt compared to the industry average....
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