Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Companies that operate in different industries may have very different financial ratio values. These differences may grow even wider when we compare companies located in
Companies that operate in different industries may have very different financial ratio values. These differences may grow even wider when we compare companies located in different countries. (Click the icon to view the financial statements.) Requirement 1. Compare three leading companies (Company E, Company M, and Company R) by calculating the following ratios: current ratio, debt ratio, leverage ratio, and times-interest-earned ratio. Use year-end figures in place of averages where needed for the purpose of calculating ratios in this exercise. Based on your computed ratio values, which company looks the least risky? Begin by computing the ratios. Start by selecting the formula for the current ratio. Then calculate the current ratios for Company E, M, and R. (Enter amounts in millions or billions as provided to you in the problem statement, X. Round the ratios to two decimal places.) | = Current ratio Company E Company M i Data Table Company R Next, select the formula for the debt ratio. Then calculate the debt ratios for Company E, M, and R. (Enter amounts in millions or billions as provided to you in the problem statement, X. Round the ratios to two decimal = Debt ratio Company E Company M Company R Company E (Amounts in millions or billions) Income data Total revenues Operating income Interest expense $ 9,735 7,317 Company M Company R 136,235 5,735 703 448 Next, select the formula for the leverage ratio. Then calculate the leverage ratios for Company E, M, and R. (Enter amounts in millions or billions as provided to you in the problem statement, X. Round the ratios to two Net income = Leverage ratio Asset and liability data Company E Company M Company R (Amounts in millions or billions) Total current assets Long-term assets Total current liabilities Long-term liabilities Stockholders' equity 4,899 949 2,237 2,266 129,600 75,408 72,000 110,457 22,551 Next, select the formula for the times-interest-earned ratio. Then calculate the times-interest-earned ratios for Company E, M, and R. (Enter amounts in millions or billions as provided to you in the problem statement, = Times-interest-earned ratio 1,345 Company E Company M Print Done Company R Based on the debt ratio, which company looks the least risky
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started