Posted: April 18th, 2016

What other ratio would you want to compute to decide whether Carnival is successfully employing leverage?

For the Years Ended December 31
2010 2009
Interest expense $368 $402
Interest paid on debt 951 1,240
Provision for income taxes 4,890 4,713
Income taxes paid-net of refunds 3,238 1,567
Net income 14,833 13,425
Net cash provided by operating activities 19,549 20,773
Cash dividends paid 3,177 2,860
Payments for plant, rental machines and other property 4,185 3,447
Payments to settle debt 6,522 13,495

1. Using the information provided, compute the following for 2010 and 2009:
a. Debt-to-equity ratio
b. Times interest earned
c. Debt service coverage ratio
d. Cash flow from operations to capital expenditures ratio

2. Comment briefly on the company’s solvency.

EXERCISE 13-11: Profitability Analysis for Carnival Corp.

Carnival Corporation and plc is one of the largest cruise companies in the world with such well-known brands as Carnival Cruise Lines, Holland America Line, and Princess Cruises. For the year ended November 30, 2010, the company reported net income of $1,978 million. Total shareholders’ equity on this date was $23,031 million, and on November 30, 2009, it was $22,039 million. No preferred stock was outstanding in either year.

1. Compute Carnival’s return on common stockholders’ equity for the year ended November 30, 2010.
2. What other ratio would you want to compute to decide whether Carnival is successfully employing leverage? Explain your answer.