Ellie's Electronics Incorporated has total assets of $66 million and total debt of $8 million. The company also has operating income of $52 million with the interest expenses of $3 million.
a. Determine Ellie's debt ratio?
b. Find out Ellie's times interest earned?
c. Based upon the information above, would you suggest to Ellie's management that the firm is in the strong enough position to suppose more debt and increase interest expense to $7 million.