Fortress Paper Ltd. operates internationally in three distinct business segments: dissolving pulp, specialty papers, and security paper products. The consolidated statements of financial position and statement of income (statement of operations) from Fortress’s 2016 annual report are presented in Exhibits 10.16A and 10.16B.

EXHIBIT 10.16A Fortress Paper Ltd.’s 2016 Consolidated Statements of Financial Position

EXHIBIT 10.16B Fortress Paper Ltd.’s 2016 Consolidated Statements of Operations

Required

a. Calculate the debt to equity ratio, the net debt as a percentage of total capitalization ratio, and the interest coverage ratio for 2016 and 2015.

b. Identify the major factors that contributed to the changes in these ratios.

c. Write a short report commenting on the results of the ratio calculations that you did in part “a.” Be sure to comment from the perspectives of an existing shareholder and a potential lender of long-term debt.

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FORTRESS PAPER LTD. Consolidated Statements of Financial Position (Canadian dollars, amounts in thousands) December 31, December 31, Note 2015 2016 ASSETS Current Cash and cash equivalents 22,132 33,964 Restricted cash 15,010 21,839 Trade accounts receivable 24,949 19,007 Other accounts receivable 7,399 4,868 7 Inventories 57,553 50,081 Financial instruments 3,626 Prepaid expenses 2,217 2,281 135,666 129,260 December 31, December 31, Note 2016 2015 Other long-term receivable 10,7 7,000 3,000 Property, plant and equipment 345,289 11 394,228 Total assets 481,549 532,894 LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities 12 49,785 60,525 Financial instruments 26 Current portion of long-term debt 13 25,851 41,069 75,662 101,594 Long-term debt 13 171,929 200,348 Deferred income taxes 14 133 180 Provisions and other long-term liabilities 10,15 12,487 7,340 Employee future benefits 16 10,789 7,484 Total liabilities 271,000 316,946 Shareholders' equity Share capital 17 175,445 182,204 Treasury shares 17 (2,357) Contributed surplus 24,208 25,318 Retained deficit (17,636) (26,776) Accumulated other comprehensive income 30,889 35,202 Total shareholders' equity 210,549 215,948 Total liabilities and shareholders' equity 481,549 532,894