Some financial data for three companies and the industry norms are shown in the following table: Company X Company Y Company Z Industry Norm Debt ratio 40% 25% 20% 22% Interest time covered 8 times 7 times 10 times 9 times Price-earnings ratio 9 times 8 times 11 times 8 times

(a) From your calculation based on the information above, determine which company appears to be excessively levered. (2 marks)

(b) From your calculation based on the information above, determine which company appears to be employing financial leverage to the most appropriate degree.