Data analytics is the process of examining data sets in order to draw conclusions about the information
Question:
Data analytics is the process of examining data sets in order to draw conclusions about the information they contain. If you haven’t completed any of the prior data analytics cases, follow the instructions listed in the Chapter 1 Data Analytics case to get set up. You will need to watch the videos referred to in the Chapters 1 - 3 Data Analytics cases. No additional videos are required for this case. All short training videos can be found here: https:// www.tableau.com/learn/training#getting-started. In the Chapter 13 Data Analytics Cases, you used Tableau to examine a data set and create charts to compare our two (hypothetical) publicly traded companies:
Discount Goods and Big Store as to their liquidity - their ability to pay short-term debts as they come due. In this case, you examine the companies’ ability to pay their long-term obligations as measured by their debt to equity and times interest earned ratios. The debt to equity ratio is measured as total liabilities / shareholder’s equity and provides us an indication of the likelihood a company will default on its obligations. Other things being equal, the higher the debt to equity ratio, the higher the risk. The times interest earned ratio compares interest payments with income available to pay those charges. It is calculated by adding interest plus taxes to net income and dividing by shareholder’s equity. The higher the ratio, the greater the margin of safety provided to creditors.
Required:
Use Tableau to calculate and display the trends for the debt to equity and times interest earned ratios for each of the two companies in the period 2018-2021. the average debt to equity ratio and times interest earned ratio for companies in the General Retailers industry sector in a comparable time period are 1.92 and 10.6, respectively. Based upon what you find, answer the following questions:
1. Other things being equal, do both companies appear to have the ability to meet their obligations as measured by the debt to equity ratio?
2. Based solely on the times interest earned ratios, do you reach the same conclusion as in Requirement 1?
3. Is the margin of safety provided to creditors by Discount Goods improving or declining in recent years as measured by the average times interest earned ratio?
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1260481952
10th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas