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Westjet's Debt To Asset Ratio Analysis

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Westjet's Debt To Asset Ratio Analysis
A main measurement of a company’s solvency is their debt- to-asset ratio. “This ratio indicates the proportion of total assets that are financed by debt.” (text) If this ratio is high it indicates a greater financing risk. In 2007 WestJet’s debt-to-asset ratio was 68.2%, it decreased in 2008 to 66.9%. This means they are financing more of the assets with equity in 2008 compared to 2007. When we compare this ratio to Air Canada we see a telling story. In 2007 Air Canada’s debt-to-asset ratio was 77.8%, but in 2008 it rose to 91.6% mainly due to a rise in current liabilities. This shows that Air Canada is relying greatly on debt to finance their assets. When comparing the two, it is obvious that WestJet’s financing strategy is less risky as well

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