Calculate the ratios for Ace Limited - Essay Example

Earnings per share ratio have been calculated to determine the ability of company to generate earning on each share outstanding. Since the company does not have any preferred shares therefore, all earnings have been generated on outstanding shares. The earning per share is $0.223 which means that company has generated $0.223 on each share outstanding. It shows the profitability of Ace limited because the company has been able to generate positive earnings for its shareholders. In order to determine how Ace Limited is leveraging its debt against the capital employed by the shareholders, this ratio has been calculated.

The ratio shows that debt of the company is 0.0763 times of shareholders equity. In other words, Ace Limited has $0.0763 of debt and $1 in equity to meet its obligations. It means that the capital structure of the company primarily comes from the capital employed by shareholders and company is very less dependent on debt. The interest coverage ratio has been calculated to show the ability of the company to cover its interest expenses on outstanding debt. The value of the interest ratio is 254.

3, which has been calculated by dividing the earnings before interest and tax with interest expense or finance cost. The higher ratio shows that Ace Limited does not have any debt burden and company is efficiently managing its debt expense. The major reason of this coverage is the profitability of the company and less dependence on debt. Based on the above calculated ratios, it can be concluded that Ace Limited is a profitable company and the capital of the company primarily comes from the capital shared by owners.

The company is less dependent on loans and debts, which has helped the company to keep its interests expense low. The company has generated $0.223 per share outstanding this year and paid out the dividend of $2 on each share outstanding. Therefore, Ace Limited is a profitable company