Credit analyst is evaluating the solvency of Alcatel as of the beginning of 2005. The following data are gathered from the company's 2005 annual report (in € millions): 2004 2003 Total equity 4,389 4,038 Accrued pension 1,144 1,010 Other reserves 2,278 3,049 Total financial debt 4,359 5,293 Other liabilities 6,867 7,742 Total assets 19,037 21,132 The analyst concludes that, as used by Alcatel in its 2005 annual report, "total financial debt" consists of noncurrent debt and the interest-bearing, borrowed portion of current liabilities. 1. A. Calculate the company's financial leverage ratio for 2004. B. Interpret the financial leverage ratio calculated in Part A.

Credit analyst is evaluating the solvency of Alcatel as of the beginning of 2005. The following data are gathered from the company's 2005 annual report (in € millions): 2004 2003 Total equity 4,389 4,038 Accrued pension 1,144 1,010 Other reserves 2,278 3,049 Total financial debt 4,359 5,293 Other liabilities 6,867 7,742 Total assets 19,037 21,132 The analyst concludes that, as used by Alcatel in its 2005 annual report, "total financial debt" consists of noncurrent debt and the interest-bearing, borrowed portion of current liabilities. 1. A. Calculate the company's financial leverage ratio for 2004. B. Interpret the financial leverage ratio calculated in Part A.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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