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Question: (Financing decisions) Emma's Electronics Incorporated has total assets of $63 million and total debt of $42 million. The company also has operating profits of $21 million with interest expenses of $6 million.

a. What is Emma's debt ratio?

b. What is Emma's times interest earned?

c. Based on the information above, would you recommend to Emma's management that the firm is in a strong enough position to assume more debt and increase interest expense to $9 million.

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