Calculation of leverage ratios, Financial Accounting

 

Calculation of Leverage ratios  -

     
         
   

2008

2009

2010

U

EBIT or Operating Profit (Net)

660135

935835

1182927

V

Interest Expenses

56543

86809

114257

W

Equity

1277659

1690493

2257267

X

Total Assets

3103645

4049092

5131809

Y

Long term Liabilities

833303

1018308

1130779

Z

Current Liabilities

992683

1340291

1743763

A1

Net Fixed Assets

1319370

1695821

2226664

         
 

Interest Coverage Ratio (U / V)

11.67

10.78

10.35

         
 

Owner's Equity to Total Liabilities ( W / (Y + Z))

0.70

0.72

0.79

         
 

Owner's Equity to Total Assets (W / X)

0.41

0.42

0.44

         
 

Fixed Assets to Long Term Liabilities (A1 / Y)

1.58

1.67

1.97

The leverage position of the firm as shown by the above ratios seems not too bad, in the sense that the equity position of the firm as compared to the total assets and liabilities are showing continuous improvement over the last two years. i.e. the Owner's equity to Total liabilities and Total assets have shown improvement but marginally. There has been improvement in the long term liabilities position as compared to fixed assets i.e. the firm's degree of leverage has been declining marginally from 2008 to 2010.

Though the leverage position is not a burden for the company at this point of time, the interest paying capability of the firm has been deteriorating over the years. This is not good for the firm and the firm should take necessary actions for improving the same. 

Posted Date: 7/26/2012 5:59:50 AM | Location : United States







Related Discussions:- Calculation of leverage ratios, Assignment Help, Ask Question on Calculation of leverage ratios, Get Answer, Expert's Help, Calculation of leverage ratios Discussions

Write discussion on Calculation of leverage ratios
Your posts are moderated
Related Questions
When Lydia started her vending machine business, she instituted flexible budgeting for the first few months of operations. Her first monthly budget numbers were these: Cost of g

The common stock of the CC Corporation has been trading in a narrow price range of around $50 for months, and you are convinced it is going to stay in that range for the next 3 mon


Prepare journal entries to record the issuance of 100,000 shares of common stock at $20 per share for each of the following independent cases given below: a. Jackson Corporation

Fixed Interest Securities No advice in writing is required before an investment in fixed interest securities is made. Government Securities. Treasury Bills. Fixed

AsIDENTIFY THE MAIN PROVISIONS OF THE PARTNERSHIP ACT k question #Minimum 100 words accepted#

The Statement of Affairs The statement of affairs sets out: (a) The various assets of the debtor, at the values they are expected to realise; (b) The creditors, classified acc

Calculating Present Value [LO2]  You have just received notification that you have won the $1 million first prize in the Centennial Lottery.  However, the prize will be awarded on

IDEAL MINORITY INTEREST The minority interest ideally is entitled to the profit after tax in minority interest. However due to consolidation, the profits of the subsidiary compan

what is the formulae for calculating Net income?