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12-10. (Assessing leverage use) Financial data for three corporations ar displayed here. INDUSTRY NORM MEASURE Debt ratio Times interest earned Price/earnings ratio FIRM A 20%

12-10. (Assessing leverage use) Financial data for three corporations ar displayed here. INDUSTRY NORM MEASURE Debt ratio Times interest earned Price/earnings ratio FIRM A 20% 8 times 9 times FIRM B 25% 10 times 11 times FIRM C 40% 7 times 6 times 9 times 10 times a. Which firm appears to be excessively leveraged? b. Which firm appears to be employing financial leverage to the most appropri- ate degree? c. What explanation can you provide for the higher price/earnings ratio enjoyed by firm B as compared with firm A

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