Determine the ebitinterest coverage ratio of each firm

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You are analyzing the leverage of two firms and you note the following (all values in millions of dollars):

 

Debt

Book Equity

Market Equity

EBIT

Interest Expense

Firm A

500

300

400

100

50

Firm B

 80

 35

 40

  8

  7

  • What is the market debt-to-equity ratio of each firm?
  • What is the book debt-to-equity ratio of each firm?
  • What is the EBIT/interest coverage ratio of each firm?
  • Which firm may have more difficulty meeting its debt obligations? Explain.

Reference no: EM13476891

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