Financial information from fiscal year 2017 for two companies, Carson Sportswear and Boswell Dresses, which are competing businesses in the sportswear market in Utah, appears in the table below. All dollar values are in thousands.

a. Calculate the debt ratio and times interest earned ratio for each company. Identify the similarities and differences in terms of their debt usage.

b. Calculate the ratio of interest expense to total liabilities for each company. What do you think this ratio is trying to measure on theoretical basis? Explain why the values for this ratio are very different for the two companies.

Transcribed Image Text:

Total assets Total liabilities EBIT 4,876,000 Interest expense Carson $27,668,200 16,906,300 476,585 210,400 Boswell $1,242,487 819,901 76,585 47,149