1."Other things being equal, do both companies appear to have the ability to meet their obligations as measured by the debt to equity ratio?2.Based solely on the times interest earned ratios, do you reach the same conclusion as in Requirement 1?3.Is the margin of safety provided to creditors by Discount Goods improving or declining in recent years as measured by the average times interest earned ratio?" Please do not copy and paste some other solutions from here. This image displays a bar chart comparing the "Times Interest Earned Ratio" of two companies—Big Store and Discount Goods—over the years 2018 to 2021. The Times Interest Earned Ratio is a measure of a company's ability to meet its debt obligations based on its current earnings.### Description of the Bar Chart:- **Title:** Long-Term Solvency: Times Interest Earned Ratio- **X-Axis:** Years (2018 to 2021)- **Y-Axis:** Times Interest Earned Ratio- **Companies:** Big Store (left section) and Discount Goods (right section)### Data Overview:#### Big Store:- **2018:** Ratio of 10.71 (purple bar)- **2019:** Ratio of 14.50 (yellow bar) - highest value depicted- **2020:** Ratio of 10.93 (pink bar)- **2021:** Ratio of 12.69 (red bar)#### Discount Goods:- **2018:** Ratio of 5.37 (light blue bar)- **2019:** Ratio of 4.96 (orange bar)- **2020:** Ratio of 4.84 (green bar)- **2021:** Ratio of 4.42 (blue bar)Big Store generally maintains a higher Times Interest Earned Ratio compared to Discount Goods throughout the observed years, indicating a stronger ability to cover interest obligations with its earnings. **Long-Term Solvency: Debt to Equity Ratio Analysis**This bar chart presents the Debt to Equity Ratio across two companies — Big Store and Discount Goods — over the period from 2018 to 2021. The Debt to Equity Ratio is a critical measure of a company's financial leverage, indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.### Big Store:- **2018:** The ratio stands at 1.5841.- **2019:** The ratio shows a decrease to 1.4296.- **2020:** The ratio experiences a slight increase to 1.4907.- **2021:** The ratio continues with a minor decrease to 1.4119.### Discount Goods:- **2018:** The ratio is notably higher at 1.8220.- **2019:** The ratio remains high, slightly decreasing to 1.9017.- **2020:** There is a significant decrease to 1.6783.- **2021:** The ratio further decreases to 1.6732.### Analysis:The chart illustrates how both companies manage their debt relative to equity over the specified years, allowing for comparisons in financial strategies and risk levels. Big Store maintains a relatively stable and lower ratio compared to Discount Goods, suggesting a more conservative financial structure. Discount Goods starts with higher ratios, indicative of more aggressive leveraging which slightly stabilizes by 2021.This data is essential for stakeholders to assess the financial health and risk exposure of these companies over the given time frame.

Margin of safety to creditors decreases the margin available as earnings before interest and tax, in order to meet the financial obligations. The ideal times interest earned ratio is 2.5 times. Any less in ratio would cause risk to meet the obligations. The debt to equity ratio of 1 is considered as neutral, hence debt to equity ratio of 1 or more is considered good. Any less in ratio would cause risk to meet the obligations. Debt to equity ratio of 1 or more is considered good. The ideal debt to equity ratio is of 2. As illustrated from the bar chart, no company has debt to equity ratio of less than 1, hence both the companies are said to be competent to meet their financial obligations, where Discount Good company is more competent if compared. To conclude, "Other things being equal, both the companies appears to have the ability to meet their obligations as measured by the debt to equity ratio."The ideal times interest earned ratio is said to be 2.5 times. By analyzing the bar chart of both the companies, it can be said that both the companies have times interest earned ratio of more than 2.5 times, hence Both the companies are competent to meet their financial obligations, where the Big store company is more competent if compared. In Requirement 1 too, both the companies have the ability to meet the said obligations. To conclude, The solution reached is same as in Requirement 1.As observed from the bar chart, the times interest earned ratio in respect of Discount goods kept on decreasing, hence we can say that the company is providing more margin towards creditors and due to which the margin left as earnings before interest and tax kept on declining. To conclude, the margin of safety provided to creditors by Discount goods is improving in recent years as measured by the average times interest earned ratio.