You are analyzing the leverage of two firms and you note the following (all values in millions of dollars): Debt 497.6 Market Equity 398.1 80.5 38.3 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 interest coverage ratio of each firm? d. Which firm will have more difficulty meeting its debt obligations? Book Equity 301.9 36.7 Operating Income 100.5 7.7 Interest Expense 49.9 6.7

Essentials Of Investments
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Chapter1: Investments: Background And Issues
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You are analyzing the leverage of two firms and you note the following (all values in millions of dollars):
Debt
497.6
80.5
Book Equity
301.9
Market Equity
398.1
38.3
36.7
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 interest coverage ratio of each firm?
d. Which firm will have more difficulty meeting its debt obligations?
www
Operating Income
100.5
7.7
Interest Expense
49.9
6.7
Transcribed Image Text:✓ You are analyzing the leverage of two firms and you note the following (all values in millions of dollars): Debt 497.6 80.5 Book Equity 301.9 Market Equity 398.1 38.3 36.7 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 interest coverage ratio of each firm? d. Which firm will have more difficulty meeting its debt obligations? www Operating Income 100.5 7.7 Interest Expense 49.9 6.7
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