Question
Red Snail Satellite Company has a total asset turnover ratio of 3.50x, net annual sales of $25 million, and operating expenses of $11.25 million (including
Red Snail Satellite Company has a total asset turnover ratio of 3.50x, net annual sales of $25 million, and operating expenses of $11.25 million (including depreciation and amortization). On its current balance sheet and income statement, respectively, it reported total debt of $2.5 million, on which it pays 7% interest on its outstanding debt.
To analyze a companys financial leverage situation, you need to measure the firms debt management ratios. Based on the preceding information, what are the values for Red Snail Satellites debt management ratios? (Note: Do not round intermediate calculations.)
Red Snail Satellite Company raises around ? from creditors for each dollar of equity.
Influenced by a firms ability to make interest payments and pay back its debt, if all else is equal, creditors would prefer to give loans to companies with ? debt ratios.
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