Problem
1) Calculate the company's debt-to-equity ratio and times interest earned ratio for the last two years. Obtain the industry averages for these ratios and any other pertinent information.
Debt-to-Equity Ratio = Total Liabilities/Total Shareholder's Equity
2023: 4.12
2022: 6.61
Industry average: 1.2
Times Interest Earned Ratio = Income Before Income Tax + Interest Expense /Interest Expense
2023: 8.33
2022: 11.03
Industry average: 12.08
2) Discuss what each of these ratios tells you about the company's use of debt and how it compares to the industry average.
3) Identify the major causes of any changes in these ratios and discuss your assessment of the company based on these changes.
4) If you were a lender, discuss whether you would you be willing to lend money to the company based on its use of debt.