Question

Assets/Equity	3.32	3.62	3.65	3.46	3.42	3.11
Debt/Equity	0.56	0.97	1.00	0.98	1.16	0.98
% LT Debt to Total Capital	18.0%	48.6%	45.3%	48.2%	46.5%	46.4%
(Total Debt - Cash) / EBITDA	1.22	1.28	1.38	1.40	1.31	1.35

Question: Please analyze the debt ratio (referred to as leverage ratio as well) of the company by selecting at least 2 (two) debt ratio to describe the ability to meet long term obligations, remain solvent, and avoid bankruptcy. (Please Highly Comprehensive and highly accurate application of the knowledge )

Answer 1

in the first company, the debt ratio is 0.56 and the % of total debt is also 18%, which is a very good sign that this company has very low debt compared to equity and is has low cost of capital and low intrest payments.Therefore it is very likely to remain solvent.

in the Second company, the debt ratio is 0.97 and the % of total debt is also 48.6%, which is a not good sign that this company has high debt compared to equity and is has high cost of capital and bigger intrest payments.Therefore it is less likely to remain solvent as the total debt-cash/EBITDA is also high 1.28. It is in grim shape.

in the Third company, the debt ratio is 1.00 and the % of total debt is also 45.3%, which is a not good sign that this company has high debt compared to equity and is has high cost of capital and bigger intrest payments.Therefore it is also less likely to remain solvent as the total debt-cash/EBITDA is also higher than the other companies 1.38. It is in grim shape.