Week 4 Discussion 2 Response 2

FOR THIS RESPONSE YOU WILL HAVE TO RESPOND TO THE RESPONSE BELOW. THE RESPONSE HAS TO BE 100 WORDS.

The text notes that “Long-term liabilities are a component of the “capital structure” of the company and are included in the calculation of the debt-to-equity ratio” I used the Pool Corps 2019 annual report to obtain the figures below. The company’s debt to income ratio is an indicator of how the company uses debt. In some instances a company may assume a lot of debt by taking our lots of loans or purchasing big ticket equipment like vehicles as a way to grow their business and compete with larger competitors or some may take the less risky path of avoiding debit as much as possible. Companies with high debt to equity ratio might be considered more high risk to lenders especially if they are not meeting their obligations or they are slow payers. This could be an indication that the company is financing their growth through borrowing which is not necessarily a negative. On the other hand companies with little debt might seem more attractive and less risky to potential lenders. In the case of Pool Corp, their D/E ratio is relatively low compared to their competitors.  At the same period of the report used for this analysis, the industry had a debt to income ratio of 2.62, their long term debt as an industry was estimated at $1.07B which makes the company appear less risky than their competitors.

Debt to equity ratio

1,073,086 = 0.38

410,180

Times interest earned ratio

317,474 = 0.07

23,772