Analyzing Financial Data - 15000000(.006) b. Discuss the...

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a. Calculate the debt ratio, time interest earned, earnings per share, and the financial Leverage index under each alternative, assuming the expected increase in operating Profit is realized. DEBT RATIO total liabilities/total assets 40000000/50000000 .8 TIME INTEREST EARNED operating profit/interest expense .32 EARNINGS PER SHARE net earnings/average shares outstanding 10.2 FINANCIAL LEVERAGE return on equity/adjusted return on assets 12/.1= .01 Net earnings + interest expense (1-tax rate) ^10/total assets= adjusted return on assets
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Unformatted text preview: 15000000(.006) b. Discuss the factors the board should consider in making a decision. They should discuss the fact that they have a high debt ratio, but however their financial leverage is less than a one which means the company is not using debt successfully, so there for I believe that the board should account for that even though they are bringing in plenty of income that they are at a high risk for them to be loaned any money....
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