You are analyzing the leverage of two firms and you note the following (all values in...

Transcribed Image Text:

You are analyzing the leverage of two firms and you note the following (all values in millions of dollars): Firm A Firm B a. What is the market debt-to-equity ratio of each firm? b. What is the book debt-to-equity ratio of each firm? c. What is the EBIT/interest coverage ratio of each firm? Debt 499.5 77.9 d. Which firm may have more difficulty meeting its debt obligations? Explain. a. What is the market debt-to-equity ratio of each firm? The market debt-to-equity ratio for Firm A is The market debt-to-equity ratio for Firm B is (Round to two decimal places.) (Round to two decimal places.) b. What is the book debt-to-equity ratio of each firm? The book debt-to-equity ratio for Firm A is The book debt-to-equity ratio for Firm B is (Round to two decimal places.) (Round to two decimal places.) c. What is the interest coverage ratio of each firm? The interest coverage ratio for Firm A is (Round to two decimal places.) The interest coverage ratio for Firm B is (Round to two decimal places.) d. Which firm may have more difficulty meeting its debt obligations? Explain. (Select from the drop-down menus.) has a lower coverage ratio and will have slightly more difficulty meeting its debt obligations than Book Equity Market Equity EBIT 304.2 36.2 401.3 42.8 104.7 7.9 Interest Expense 45.9 6.6 You are analyzing the leverage of two firms and you note the following (all values in millions of dollars): Firm A Firm B a. What is the market debt-to-equity ratio of each firm? b. What is the book debt-to-equity ratio of each firm? c. What is the EBIT/interest coverage ratio of each firm? Debt 499.5 77.9 d. Which firm may have more difficulty meeting its debt obligations? Explain. a. What is the market debt-to-equity ratio of each firm? The market debt-to-equity ratio for Firm A is The market debt-to-equity ratio for Firm B is (Round to two decimal places.) (Round to two decimal places.) b. What is the book debt-to-equity ratio of each firm? The book debt-to-equity ratio for Firm A is The book debt-to-equity ratio for Firm B is (Round to two decimal places.) (Round to two decimal places.) c. What is the interest coverage ratio of each firm? The interest coverage ratio for Firm A is (Round to two decimal places.) The interest coverage ratio for Firm B is (Round to two decimal places.) d. Which firm may have more difficulty meeting its debt obligations? Explain. (Select from the drop-down menus.) has a lower coverage ratio and will have slightly more difficulty meeting its debt obligations than Book Equity Market Equity EBIT 304.2 36.2 401.3 42.8 104.7 7.9 Interest Expense 45.9 6.6

Answer rating: 100% (QA)

a Market Debt to Equity ratio can be computed as Debt ... View the full answer