Introduction to Finance

Figure 18.5
shows the ratio of long-term debt to total assets for several fi rms. The graph 
shows a wide variation in capital structures. Google (now with the corporate name of Alphabet), 
which went public in 2004 and had a secondary equity off ering in 2005, has little debt. Apple 
and Microsoft, whose true assets are software, ideas, and knowledge rather than bricks and 
mortar, have low debt ratios. Walgreens has a low ratio of long-term debt to assets but that 
is because it leases, rather than owns, many of its stores to conserve capital. Over most of 
the time frame, the fi rms with the highest level of debt relative to assets are Consolidated 
Edison (Con Ed) and AT&T. This is no surprise, since as a utility most of its asset base are 
fi xed assets, which are more amenable to borrowing than ideas or software. In addition, Con 
110
80
90
100
70
60
50
40
1/3/2007 1/3/2008 1/3/2009 1/3/2010 1/3/2011
ExxonMobil Stock Price 2007–2016
1/3/2012
1/3/2016
1/3/2013 1/3/2014 1/3/2015
FIGURE 18.4
 ExxonMobil 
Stock Price 2007–2016

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18.5 Planning Growth Rates
579
Ed, since it is regulated, should be able to charge electric rates suffi
cient to service the debt 
interest. The large increase in McDonald’s debt in 2015 is due to a plan to shift its capital 
structure by issuing debt to repurchase stock and increase shareholder dividends.
LEARNING ACTIVITY
1.
A fi rm may have only one class of common stock but many bonds outstanding. 
Data on bonds outstanding for a specifi c fi rm can be found in the fi nancial reports 
on fi rms’ websites and in Mergent’s Bond Record, found in your library or on the 
Internet at http://www.mergent.com.