[ali_patrik]

Company Total Assets Total Liabilities Net 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 this data:
• Calculate the debt-to-equity ratio and rank the investments base on least risky to most risky.
• Explain the logic of your analysis
• 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

[pready]

The Debt to Equity Ratio is very simple, as it is simply Debt divided by Equity. Based on the information you provided in your post the Debt amount is given to you, as debt is otherwise known as Liabilitites. Now all you have to compute the equity amount, which based on the information you provided is based on the accounting equation. The accounting equation is Assets = Liabilities + Equity, which can be rewritten to Assets - Liabilities = Equity. Now you have the all the numbers you need to compute the Debt to Equity Ratio.

The Debt to Assets Ratio is simply Debt divided by Assets. You have both the debt and assets amounts.

The Times Earned Interest Ratio is simply Income before interest and taxes divided by interest.

[ali_patrik]

Thanks a million mate, you helped me big time...