This week (6) we will evaluate the company’s debt utilization ratios. This category of ratios is especially important to creditors and investors. (A tip for this: the eStatement Studies database uses the term ‘Net Worth’ for the equity ratio, so as you collect data look for that value. There will be just one value rather than the three quartile breaks we have gotten used to seeing. The database also does not directly provide the debt ratio, but we can calculate it: Debt ratio = 100 – equity ratio.)
Our task is to prepare a report with the required information provided below. Use the same heading names (in bold) before presenting the information as requested.
Report Headings
Name of Company and Ticker Symbol: Company name, ticker symbol
10-K Report: Paste the direct URL to the company’s most recent 10-K Report
Company Website: Paste the URL to the company’s website
Industry name and NAICS Code: Provide the name and NAICS code associated with the Industry Average data.
Debt Utilization Ratios: Follow the formatting in the example below to present the data. See this sample eStatement Studies document for help in finding the industry average data needed for this assignment.
20XX
20XX
20XX
Industry Average*
Debt Ratio
(Total Liabilities / Total Assets)
—
—
—
—-
Equity Ratio
(Total Equity / Total Assets)
—
—
—
—-
Times Interest Earned
(EBIT / Interest Exp)
—
—
—
—-
—-
—-
* There will be a single industry average for the debt and equity ratios. List all 3 industry average figures for the Time Interest Earned ratio.
Evaluation: Share what we learn from the data and information collected for this discussion. Interpret each of the ratios. Review the Financial Ratios Guidelines document for direction. Do you see any red flags? Does the company make greater use of debt financing or equity financing? Does the company have too much debt? How safely can the company cover its interest expense? How does this company compare to the industry averages?
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