Pelican paper, inc., and timberland forest, inc., are rivals in the

P3-21 Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each company follow. Use them in a ratio analysis that compares the firms’ financial leverage and profitability.

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

Item

Pelican Paper, Inc.

Timberland Forest, Inc.

Total assets

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Get My Paper

$10,000,000 

$10,000,000

Total equity (all common)

9,000,000

5,000,000

Total debt

1,000,000

5,000,000

Annual interest 

100,000

500,000

Total sales

25,000,000

25,000,000

EBIT 

6,250,000

6,250,000

Earnings available for common stockholders

3,690,000

3,450,000

 

a. Calculate the following debt and coverage ratios for the two companies. Discuss their financial risk and ability to cover the costs in relation to each other.

1. Debt ratio

2. Times interest earned ratio

 

b. Calculate the following profitability ratios for the two companies. Discuss their profitability relative to one another.

1. Operating profit margin
2. Net profit margin
3. Return on total assets
4. Return on common equity

 

c. In what way has the larger debt of Timberland Forest made it more profitable than Pelican Paper? What are the risks that Timberland’s investors undertake when they choose to purchase its stock instead of Pelican’s?

Calculate your order
Pages (275 words)
Standard price: $0.00
Client Reviews
4.9
Sitejabber
4.6
Trustpilot
4.8
Our Guarantees
100% Confidentiality
Information about customers is confidential and never disclosed to third parties.
Original Writing
We complete all papers from scratch. You can get a plagiarism report.
Timely Delivery
No missed deadlines – 97% of assignments are completed in time.
Money Back
If you're confident that a writer didn't follow your order details, ask for a refund.

Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:
$0.00
Power up Your Academic Success with the
Team of Professionals. We’ve Got Your Back.
Power up Your Study Success with Experts We’ve Got Your Back.
Open chat
1
Order through WhatsApp!
nursingesssayswritings.com
Hello!
You Can Now Place your Order through WhatsApp

Order your essay today and save 30% with the discount code ESSAYHELP2