Question

so i got these answers for ratios (balance sheet not shown). im just wondering what exactly these numbers represent? are they aupposed to be percentages or?

E Present- Shard Format Slide Arrange O -O \ Tools Add-ons Help All changes saved in Drive Background Layout Theme Transition Debt to Capital Ratio Cash to Debt Ratio 0.48 0.14 0.46 0.07 0.44 0.12 0.42 0.12 0.42 0.20 0.39 0.13 0.40 0.20 0.39 0.23 Interest Coverage -0.077 -0.353 -0.317 -0.248 -0.781 -0.322 0.704 0.360 lick to add speaker notes

Answer 1

Debt to capital ratio: Debt to capital ratio represents the proportion of debt in the total capital raised by the firm or amount financed by outsiders. It is calculated by:

Debt to capital ratio = Debt / Debt + Capital

The lower the debt to capital ratio, better it is for the firm. In the given example, debt to capital ratio is increased (assuming first column is for mosr recent year and then preceding years). It shows that the firm has relied more on outside debt in relation to preceding years.

Cash to Debt ratio: Cash to Debt ratio represents the amount of cash available to pay off its debt obligations. It is calculated by:

Cash to Debt ratio = Cash and cash equivalents / Debt

The higher the cash to debt ratio, better it is for the firm.

Interest coverage ratio: Interest coverage ratio measures whether the current earnings are sufficient to pay the interest expense on outstanding debt. It is calculated by:

Interest coverage ratio = Earnings before interest and taxes / Interest expense

Higher the interest coverage ratio, better it is for the firm.