A credit analyst is evaluating and comparing the solvency of two companies—Nokia Corporation (NYSE: NOK) and LM Ericsson Telephone Company (NYSE: ERIC)—

at the beginning of 2009. The following data are gathered from the companies’ 2008 annual reports and 20-F filings:

Use the above information to answer the following questions:
1.

A. What are each company’s debt-to-assets, debt-to-capital, and debt-to-equity ratios for 2008 and 2007?
B. Comment on any changes in the calculated leverage ratios from year-to-year for both companies.
C. Comment on the calculated leverage ratios of Nokia compared to Ericsson.
2.

A. What is each company’s interest coverage ratio for 2008 and 2007?
B. Comment on any changes in the interest coverage ratio from year to year for both companies.
C. Comment on the interest coverage ratio of Nokia compared to Ericsson.

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Short-term borrowings Current portion of long-term interest bearing debt Long-term interest bearing debt Total shareholders' equity Total assets EBIT Interest payments Nokia ( millions) 2008 3,578 13 861 14,208 39,582 4,966 155 2007 714 173 203 14,773 37,599 7,985 59 Ericsson (SEK millions) 2008 1,639 3,903 24,939 140,823 285,684 16,252 1,689 2007 2,831 3,068 21,320 134,112 245,117 30,646 1,513