Two of the world’s leading cruise lines are Royal Caribbean Cruises and Carnival
ID: 2464681 • Letter: T
Question
Two of the world’s leading cruise lines are Royal Caribbean Cruises and Carnival Corporation. Selected financial data for these two close competitors are as follows:
Calculate the debt to equity ratio for Royal Caribbean and Carnival for the most recent year. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Royal Caribbean -
Carnival -
Which company has the higher ratio?
B)
Calculate the return on assets and the return on equity for Royal Caribbean and Carnival. (Round your answers to 1 decimal place.)
Royal Caribbean -
Carnival -
Which company has the better profitability ratios?
C)
Calculate the times interest earned ratio for Royal Caribbean and Carnival.(Round your answers to 1 decimal place.)
Two of the world’s leading cruise lines are Royal Caribbean Cruises and Carnival Corporation. Selected financial data for these two close competitors are as follows:
Explanation / Answer
Debt Equity Ratio = Total liabilities/stockholder's equity
Calculation of debt equity ratio for year 2011
Royal carribean cruises = 9800/6593
= 1.49
Carnival corporation = 15775/19238
= 0.82
Royal caribean cruise has higher debt equity ratio
B. Return on Assets = Net Income/Average total assets
Calculation of Return on assets of Royal caribean cruises
Average total assets = (Beginning total assets + ending total assets)/2
= (16393 + 15122)/2
= 15757.50
ROA = 588/15757.50 x 100 = 3.73%
Calculation of Return on assets of Royal carnival corporation
Average total assets = (35013 + 34321)/2
= 34667
ROA = 2344/34667 x 100 = 6.76%
Return on Equity (ROE) = Net Income/Shareholder's equity
Royal caribean cruises = 588/6593 x100 = 8.92%
Carnival corporation = 2344/19238 x 100
= 12.18%
C. Times interest earned ratio (TIE) = Income before interest and taxes/Interest expens
Royal caribean cruises
Income before interest and and tax = Income after interest and tax + interest + tax
= 588 + 0 + 348
= 936
TIE ratio = 936/348 = 2.69 times
Carnival corporation
Income before interest and tax = 2344 + 54 + 428
= 2826
TIE ratio = 2826/428 = 6.60
Carnival corporation will be better in paying interest
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.