3 AB D G H 1 4 5 7 Item Total assets Total equity (all common) Total debt Annual interest Total sales EBIT Earnings available for common stockholders Pelican Paper $10,000,000 9,000,000 1,000,000 100,000 25,000,000 6,250,000 Timberland Forest $10,000,000 5,000,000 5,000,000 500,000 25,000,000 6,250,000 10 11 12 12 14 3,690,000 3.450,000 IS 10 17 18 a. Calculate the following debt and coverage ratios for the two companies, Discuss their financial risk and ability to cover the costs in relation to each other 1. Debt ratio 2. Times interest eamed ratio Instrucciones Problem 3:24 19 Cath problem Problem 20 36 37 Pelican Paper Timberland Forest 311 14.8% 13.896 1. Operating profit margin 2. Net profit margin 3. Return on total assets 4. Retum on common equity 40 c. In what way has the larger debt of Timberland Forest made it more profitable than Pelican Paper? What are the risks that Timberland's investors undertake when they choose to purchase its stock instead of Pelicans