ItemTotal assetsTotal equity (all common)Total debtAnnual interestTotal salesEBITEarnings available forcommon stockholdersPelican Paper, Inc.$10,800,0009,600,0001,200,000120,00025,000,0006,250,0003,690,000Timberland Forest, Inc.$10,800,0006,100,0004,700,000470,00025,000,0006,250,0003,450,000 The relationship between financial leverage and profitability Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each company follow. Use them in a ratio analysis that compares the firms'financial leverage and profitability.a. Calculate the following debt and coverage ratios for the two companies. Discuss their financial risk and ability to cover the costs in relation to each other.(1) Debt ratio(2) Times interest earned ratiob. Calculate the following profitability ratios for the two companies. Discuss their profitability relative to each other.(1) Operating profit margin(2) Net profit margin(3) Return on total assets(4) Return on common equityc. In what way has the larger debt of Timberland Forest made it more profitable than Pelican Paper? What are the risks that Timberland's investors undertake when they choose to purchase its stock instead of Pelican's?a. The debt ratio for Pelican is %. (Round to one decimal place.)C

Name: ItemTotal assetsTotal equity (all common)Total debtAnnual interestTot
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Description: ItemTotal assetsTotal equity (all common)Total debtAnnual interestTotal salesEBITEarnings available forcommon stockholdersPelican Paper, Inc.$10,800,0009,600,0001,200,000120,00025,000,0006,250,0003,690,000Timberland Forest, Inc.$10,800,0006,100,0004

Financial ratios are the ratios derived using the financial statements to know about a company's…

Answered: a. The debt ratio for Pelican is %.…

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a. The debt ratio for Pelican is %. (Round to one decimal place.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 10P

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