AGF Foods Company is a large, primarily domestic, consumer foods company involved in the manufacture, distribution, and sale of a variety of food products. Industry averages are derived from Troy’s The Almanac of Business and Industrial Financial Ratios. Following are the 2024 and 2023 comparative income statements and balance sheets for AGF. (The financial data we use are from actual financial statements of a well-known corporation, but the company name is fictitious, and the numbers and dates have been modified slightly to disguise the company’s identity.)

Long-term solvency refers to a company’s ability to pay its long-term obligations. Financing ratios provide investors and creditors with an indication of this element of risk.

Required:
1. Calculate the debt to equity ratio for AGF for 2024.
2. The average ratio for the stocks listed on the New York Stock Exchange in a comparable time period was 1.0. Other things being equal, does AGF appear to have higher or lower default risk than others in its industry?
3. Is AGF experiencing favorable or unfavorable financial leverage?
4. Calculate AGF’s times interest earned ratio for 2024.
5. The coverage for the stocks listed on the New York Stock Exchange in a comparable time period was 5.1. Other things being equal, does AGF appear to have higher or lower interest coverage than others in its industry?

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AGF FOODS COMPANY Years Ended December 31, 2024 and 2023 ($ in millions) Comparative Income Statements Net sales Gross profit Operating income Interest expense Income from operations before tax Income taxes Net income Comparative Balance Sheets Assets Total current assets Property, plant, and equipment (net) Intangibles (net) Other assets Total assets Liabilities and Shareholders' Equity Total current liabilities Long-term debt Deferred income taxes Total liabilities Shareholders' equity: Common stock Additional paid-in capital Retained earnings Total shareholders' equity Total liabilities and shareholders' equity Cost of goods sold Operating expenses 2024 $6,440 (3,667) 2,773 (1,916) 857 (54) 803 (316) $ 487 $1,879 2,592 800 74 $5,345 $1,473 534 407 2,414 180 21 2,730 2,931 $5,345 2023 $5,800 (3,389) 2,411 (1,629) 782 (53) 729 (287) $ 442 $1,490 2,291 843 60 $4,684 $ 941 728 344 2,013 180 63 2,428 2,671 $4,684