Some financial data for three corporations are displayed here. a. Which firm appears to be excessively leveraged? b. Which firm appears to be employing financial

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Some financial data for three corporations are displayed here.

Some financial data for three corporations are displayed here.
a. Which

a. Which firm appears to be excessively leveraged?
b. Which firm appears to be employing financial leverage to the most appropriate degree?
c. What explanation can you provide for the higher price/ earnings ratio enjoyed by firm B as compared with firm A?

INDUSTRY NORM MEASURE Debt ratio Times interest covered Price/earnings ratio FIRM A 20% 8 times 9 times FIRM B 25% 10 times 11 times FIRM C 4096 7 times 6 times 20% 9 times 10 times

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Foundations of Finance The Logic and Practice of Financial Management

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