= Homework: Chapter 3 Homework Question 10, P3-21 (simil... Part 1 of 15 HW Score: 41.99%, 5.09 of 12 points Points: 0 of 1 : 1 Save The relationship between financial leverage and profitability Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each company follow Use them in a ratio analysis that compares the firms financial leverage and profitability. a. Calculate the following debt and coverage ratios for the two companies. Discuss their financial risk and ability to cover the costs in relation to each other. (1) Debt ratio (2) Times Interest eamed ratio b. Calculate the following profitability ratios for the two companies. Discuss their profitability relative to each other. (1) Operating profit margin (2) Net profit margin (3) Return on total assets (4) Retum on common equity c. In what way has the larger debt of Timberland Forest made it more profitable than Pelican Paper? What are the risks that Timberland's investors undertake when they choose to purchase ils stock instead of Pelican's? -X Data Table a. The debt ratio for Pelican is %. (Round to one decimal place.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Item Pelican Paper, Inc. Timberland Forest, Inc. Total assets $9,300,000 $9,300,000 Total equity (all common) 8,500,000 4,200,000 Total debt 800,000 5,100,000 Annual interest 80,000 510,000 Total sales 23,000,000 23,000,000 EBIT 5,750,000 5,750,000 Earnings available for common stockholders 3,394,800 3,174,000 Print Done Help Me Solve This View an Example Get More Check