Ratio Analysis. To this point, information conveyed by the financial statements has been used to develop a picture of the organizations fiscal status and financial operating results. As a next analytical step, generally accepted financial ratios will be calculated for the purpose of going beyond detail contained in the facility’s audited financial statements. The intent of this analysis is to gain additional detail about the fiscal status of the organization. To this end, the following area and ratios have been determined as well as their respective benchmarks:
Assignment. Your primary task is to calculate each ratio passed on financial results show on your adopted facility’s audited statements. Also, at the outset, you are to provide a solid definition of debt management in the space provided. This paragraph will serve as a foundation for the rest of your work on this assignment.
To receive credit it is essential you show your work for each ratio. Once you’ve determined each ratio, it is important to provide an interpretative summary for each ratio in the space provided. Once all of the ratios have been calculated and interpreted, you are asked to provide a summary review of your organization’s debt management status.
- Debt Management Definition. (10 points)
- Debt management Ratio Analysis
- The debt management ratio Debt Ratio calculated as a ratio of Total Liabilities to Total Assets. (5 points)
Debt ratio = Total Liabilities/Total Assets
Total liabilities =
Total assets =
Debt ratio =
Industry average = 42.3%
Interpretation Summary. (5 points)
- The debt management ratio TIE (Times Interest Earned) is calculated as a ratio of EBIT (earnings before interest and taxes) to Total assets: (5 points)
TIE = EBIT/Interest expense
EBIT (Earnings + Interest expense + Taxes) =
Earnings =
Interest expense =
Taxes =
TIE =
TIE=
Industry average = 6.6 times
Interpretation summary. (5 points)
- The Debt-to-capitalization ratio calculated as: (5 points)
Debt-to-capitalization ratio = Long-term debt/Long-term debt + Equity
Long-term debt =
Equity =
Numerator =
Denominator =
Debt-to-capitalization ratio =
Debt-to-capitalization ratio =
Industry average = 34.6%
Interpretation summary. (5 points)
- Debt-to-equity ratio = Total Liabilities/Equity (5 points)
Total Liabilities =
Equity =
Debt-to-equity ratio =
Debt-to-equity ratio =
Industry average = 0.75
Interpretation summary. (5 points)
- Overall Debt management summary. (10 points)
