(Solution) - The following information comes from the 2011 financial statemen -(2025 Original AI-Free Solution)

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The following information comes from the 2011 financial statements of Jessica Hatch Company:
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $250,000
Total stockholders? equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000
In addition, Jessica Hatch has a large number of operating leases. The future payments on these operating leases are disclosed in the notes to the financial statements as follows:
Year Payment
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,000
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330,000
All of these lease payments occur at the end of the year. The incremental borrowing rate of Jessica Hatch Company is 10%. This is also the implicit rate in all of the leases that Jessica Hatch signs.
1. Compute the debt-to-equity ratio (total liabilities/total equity).
2. Compute the debt ratio (total liabilities/total assets).
3. Assuming that Jessica Hatch?s operating leases are accounted for as capital leases, compute the debt-to-equity ratio.
4. Assuming that Jessica Hatch?s operating leases are accounted for as capital leases, compute the debt ratio.