Leverage and coverage ratios, Finance Basics

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Leverage and Coverage Ratios

 (The data for interest coverage are in I-Metrix's liquidity ratios section.  The others listed in this table are in the leverage ratios section.)

 

Most Recent Fiscal Year

Fiscal Year

(-1)

Fiscal Year

(-2)

Fiscal Year

(-3)

Debt/Equity

0.6223

0.6893

1.1880

0.1094

Debt/Assets

0.7906

0.7045

0.7070

0.4382

Interest Expense/Long term Debt

0.0501

0.0981

0.0324

0:no LTD

Times Interest Earned (TIE)

12.2922

9.1947

18.8934

34.7779

Interest Coverage

12.2922

9.1947

18.8934

34.7779

  1.  What trends, if any, are apparent in these ratios?
  2.  Are these favorable or unfavorable to the shareholders?
  3.  Are these favorable or unfavorable to the debt holders?
  4.  The debt/equity ratio from I-Metrix is based on book values. If you were to calculate the ratio on the basis of market values, would this ratio tend to be higher or lower than on the basis of book values? Why?

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