Homework Answers
a.market debt to equity ratio :
=>total debt / market value of equity
| Firm A | 1.24 |
| Firm B | 2.07 |
working:
firm A = 498.8 / 401.3
=>1.24
firm B = 81.1/39.2
=>2.07.
b.book debt to equity ratio.
| Firm A | 1.65 |
| Firm B | 2.40 |
working:
firm A = 498.8 / 302.2
=>1.65
firm B =81.1/33.8
=>2.40.
c.interest coverage ratio
=>operating income / interest expense
| Firm A | 2.00 |
| Firm B | 1.18 |
firm A = 99.4 / 49.8
=>2.00.
firm B =7.8/6.6
=>1.18.
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