The relationship between financial leverage and profitability Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each compan EE Use them in a ratio analysis that compares the firmns, financial leverage and profitability. a. Calculate the following debt and coverage ratios for the tvo companies. Discuss their financial risk and ability to cover the costs in relation to each other (1) Debt ratio (2) Times interest eamed ratio b. Calculate the following profitability ratios for the two companies. Discuss their profitability relative to each other (1) Operating profit margin (2) Net profit margin (3) Return on total assets (4) Return on common equity 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 P . The debt ratio for Pelican is 1 % (Round to one decimal place ) Data Table Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Item Pelican Paper, Inc. Timberland Forest, Inc Total assets Total equity (all common) Total debt Annual interest Total sales EBIT Earnings available for S9,500,000 8,600,000 900,000 90,000 25,000,000 6,250,000 S9,500,000 4,400,000 5,100,000 510,000 25,000,000 6,250,000 Enter your answer in the answer box and then click Check Answer common stockholders 3,690,000 3,450,000