Read: Principles of Accounting, Chapter 13: Long-Term Obligations: http://www.principlesofaccounting.com/chapter-13/
Mr. Joseph has identified five different companies in which he is interested in investing, however, he has concerns over the economy and wants to invest in companies with the lowest debt exposure. The following is a list of data for the investments:
CompanyTotal AssetsTotal LiabilitiesNet Income
A $10,000,000 $1,000,000 $200,000
B 20,000,000 3,000,000 1,000,000
C 6,000,000 4,000,000 250,000
D 15,000,000 6,000,000 1,600,000
E 30,000,000 22,000,000 4,000,000
Based on the data provided:
- Calculate the debt-to-asset ratio and rank the investments base on least risky to most risky
- Explain the logic of your analysis
- Briefly explain the “times earned interest ratio” and how it would be used in your analysis
Part 2 Writing Assignment
See Attachment for the requirement for this part.
For this week’s reflection, please write three complete and well-composed paragraphs in which you discuss, as an example, a company that currently operates in Grenada west Indies. Describe how the financial ratios of debt-to-assets, times-earned-interest, and debt-to-equity would be useful to the business leaders of this company.
Citations in apa format.