Need a solution to 13-8 Profitability Analysis for Canival Corp Carnival Corpora

Question

Need a solution to 13-8 Profitability Analysis for Canival Corp

Carnival Corporation & plc is one of hte largest cruise companies in the world with such well-known brands as Carnival Cruise Lines, Holland America Line, and Princess Cruises. Fot th eyear ended November 30, 2008, the company reported net income of $2,330 million. Total stockholders equity on this date was $19,098 million, and on November 30, 207, it was $19,963 million. No preferred stock was outstanding in either year.

1. Computer Carnival's return on common stockholders' equity for the year ended November 30, 2008

2. What other ratio would you want to compute to decide whether Carnival is successfully employing leverage? Explain your answer.

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Return on Common Stockholder's Equity = Net Income/Total Stockholder's Equity = 2330/19098*100 = 12.20%

Part B:

Another ration that be used is "Debt-Equity Ratio". It is the most well know leverage ratio and it can be used to determine the proportion of debt and equity in a company's capital structure. It can help in understanding how debt influences the overall cost of capital and helps in judging the company'a ability to meet its long term financial obligations.

Thanks.

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