Homework: hmwk 5 Score: 0 of 1 pt Problem 4-15 (similar to) 2 of 5 (0 complete)
ID: 2824028 • Letter: H
Question
Homework: hmwk 5 Score: 0 of 1 pt Problem 4-15 (similar to) 2 of 5 (0 complete) (Financing decisions) Emma's Electronics Incorporated has total assets of $67 million and total debt of $11 million. The company also has operating profits of $53 million with interest expenses of $7 million. a. What is Emma's debt ratio? b. What is Emma's times interest earned? c. Based on the information above, would you recommend to Emma's management that the firm is in a strong enough position to assume more debt and increase interest expense to $9 million? a. Emma's debt ratio is ?96. (Round to two decimal places.)Explanation / Answer
Debt ratio = total debt/total asset
= 11/67 = 16.42
Times interest earned = operating profit/interest expense
= 7.57
Yes I would recommend to increase interest expense to $9 Million by assuming more debt.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.