A credit analyst is evaluating the solvency of Alcatel-Lucent (Euronext Paris: ALU) asof the beginning of 2010. Th e following data are gathered from the company’s 2009annual report (in € millions):2009 2008Total equity 4,309 5,224Accrued pension 5,043 4,807Long-term debt 4,179 3,998Other long term liabilities* 1,267 1,595Current liabilities* 9,050 11,687Total equity + Liabilities (equals Total assets) 23,848 27,311*For purposes of this example, assume that these items are non-interest bearing, and that longterm debt equals total debt. In practice, an analyst could refer to Alcatel’s footnotes to confi rmdetails, rather than making an assumption.1 . A . Calculate the company’s fi nancial leverage ratio for 2009.B . Interpret the fi nancial leverage ratio calculated in Part A.2 . A . What are the company’s debt-to-assets, debt-to-capital, and debt-to-equity ratiosfor the two years?B . Is there any discernable trend over the two years?

A credit analyst is evaluating the solvency of Alcatel-Lucent (Euronext Paris: ALU) as
of the beginning of 2010. Th e following data are gathered from the company’s 2009
annual report (in € millions):
2009 2008
Total equity 4,309 5,224
Accrued pension 5,043 4,807
Long-term debt 4,179 3,998
Other long term liabilities* 1,267 1,595
Current liabilities* 9,050 11,687
Total equity + Liabilities (equals Total assets) 23,848 27,311
*For purposes of this example, assume that these items are non-interest bearing, and that longterm debt equals total debt. In practice, an analyst could refer to Alcatel’s footnotes to confi rm
details, rather than making an assumption.
1 . A . Calculate the company’s fi nancial leverage ratio for 2009.
B . Interpret the fi nancial leverage ratio calculated in Part A.
2 . A . What are the company’s debt-to-assets, debt-to-capital, and debt-to-equity ratios
for the two years?
B . Is there any discernable trend over the two years?