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 2021 and 2020 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.) AGF FOODS COMPANY Years Ended December 31, 2021 and 2020 ($ in millions) Comparative Income Statements 2021 2020 Net sales $ 6,440 $ 5,800 Cost of goods sold (3,667) (3,389) Gross profit 2,773 2,411 Operating expenses (1,916) (1,629) Operating income 857 782 Interest expense (54) (53) Income from operations before tax 803 729 Income taxes (316) (287) Net income $ 487 $ 442 Comparative Balance Sheets Assets Total current assets $ 1,879 $ 1,490 Property, plant, and equipnent (net) 2,592 2,291 Intangibles (net) Other assets 74 60 Total assets $ 5,345 $ 4,684 Liabilities and Shareholders' Equity Total current liabilities $ 1,473 $ Long-term debt 534 728 Deferred income taxes 407 344 Total liabilities 2,013 Shareholders' equity: Common stock 180 180 Additional paid-in capital 21 63 Retained earnings 2,730 2,428 Total shareholders' equity 2,931 2,671 Total liabilities and shareholders' equity $5,345 $ 4,684 800 843 941 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 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 2021. 2. The average ratio for the stocks listed on the New York Stock Exchange in a comparable time period was 10. 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 2021. 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Calculate the debt to equity ratio for AGF for 2021. (Enter your answer to 2 decimal places.)
