Chapter 9, Problem 9.13S

LO 5

(Learning Objective 5: Calculate the leverage ratio, debt ratio, and times-interest-earned ratio, and evaluate debt-paying ability) Examine the following selected financial information for The Deal Corporation and Simple Stores. Inc.. as of the end of their fiscal years ending in 2018:

(In millions)	The Deal Corporation	Simple Stores, Inc.
1. Total assets	$16,870	$203,130
2. Total common stockholders’ equity	$ 3,080	$ 71,310
3. Operating income	$ 1,400	$ 26,930
4. Interest expense	$ 87	$ 2,050
5. Leverage ratio
6. Total debt
7. Debt ratio
8. Times interest earned

  1.    Complete the table, calculating all the requested information for the two companies. Use year-end figures in place of averages where needed for the purposes of calculating the ratios in this exercise.

  2.    Evaluate each company’s long-term debt-paying ability (strong, medium, weak.)