You are analyzing the leverage of two firms and you note the following (all values in millions of dollars): Firm A Firm B a.
You are analyzing the leverage of two firms and you note the following (all values in millions of dollars): Firm A Firm B a. What is the market debt-to-equity ratio of each firm? b. What is the book debt-to-equity ratio of each firm? c. What is the EBIT/interest coverage ratio of each firm? Debt 499.5 77.9 d. Which firm may have more difficulty meeting its debt obligations? Explain. a. What is the market debt-to-equity ratio of each firm? The market debt-to-equity ratio for Firm A is The market debt-to-equity ratio for Firm B is (Round to two decimal places.) (Round to two decimal places.) b. What is the book debt-to-equity ratio of each firm? The book debt-to-equity ratio for Firm A is The book debt-to-equity ratio for Firm B is (Round to two decimal places.) (Round to two decimal places.) c. What is the interest coverage ratio of each firm? The interest coverage ratio for Firm A is (Round to two decimal places.) The interest coverage ratio for Firm B is (Round to two decimal places.) d. Which firm may have more difficulty meeting its debt obligations? Explain. (Select from the drop-down menus.) has a lower coverage ratio and will have slightly more difficulty meeting its debt obligations than Book Equity Market Equity EBIT 304.2 36.2 401.3 42.8 104.7 7.9 Interest Expense 45.9 6.6
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