Homework: hmwk 6 Score: 0 of 1 pt Bookmatch 4-15 (book/static) 6 of 6 (0 complet
ID: 2824041 • Letter: H
Question
Homework: hmwk 6 Score: 0 of 1 pt Bookmatch 4-15 (book/static) 6 of 6 (0 complete) (Financing decisions) Emma's Electronics Incorporated has total assets of $63 million and total debt of $42 million. The company also has operating profits of $21 million with interest expenses of $6 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 %. (Round to two decimal places.)Explanation / Answer
Debt ratio = total debt/ total asset
= 42/63
= .67
Times interest earned = operating profit/interest expense
= 21/6
= 3.5
yes, firm is strong enough to assume more debt and interest expense to $9 million .
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