A credit analyst is evaluating the solvency of Alcatel-Lucent (Euronext Paris: ALU) as of the beginning of 2010. The following data are gathered from the company’s 2009 annual report (in € millions):

1.

A. Calculate the company’s financial leverage ratio for 2009.

B. Interpret the financial leverage ratio calculated in Part A.

2.

A. What are the company’s debt-to-assets, debt-to-capital, and debt-to-equity ratios for the two years?

B. Is there any discernable trend over the two years?

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Total equity Accrued pension Long-term debt Other long term liabilities* Current liabilities* Total equity + Liabilities (equals Total assets) 2009 4,309 5,043 4,179 1,267 9,050 23,848 2008 5,224 4,807 3,998 1,595 11,687 27,311 *For purposes of this example, assume that these items are non-interest bearing, and that long- term debt equals total debt. In practice, an analyst could refer to Alcatel's footnotes to confirm details, rather than making an assumption.