An analyst collects the following financial information to assess the credit quality of Company Y and Company Z, relative to each other and their industry average. Company Z 2 250 000 Company Y 550 000 300 000 40 000 1 000 000 4 000 000 Goodwill 500 000 Present value of operating leases 300 000 Net pension liability 0 Earnings before interest and tax Funds from operations Interest expense Total debt Total capital 850 000 160 000 2 500 000 6 500 000 0 200 000 Industry average 1 400 000 600 000 100 000 2 400 000 6 000 000 200 000 200 000 0 Calculate adjusted financial ratios for both companies and the industry, and evaluate the relative creditworthiness of Company Y and Company Z. (4)
An analyst collects the following financial information to assess the credit quality of Company Y and Company Z, relative to each other and their industry average. Company Z 2 250 000 Company Y 550 000 300 000 40 000 1 000 000 4 000 000 Goodwill 500 000 Present value of operating leases 300 000 Net pension liability 0 Earnings before interest and tax Funds from operations Interest expense Total debt Total capital 850 000 160 000 2 500 000 6 500 000 0 200 000 Industry average 1 400 000 600 000 100 000 2 400 000 6 000 000 200 000 200 000 0 Calculate adjusted financial ratios for both companies and the industry, and evaluate the relative creditworthiness of Company Y and Company Z. (4)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Question 4
An analyst collects the following financial information to assess the credit quality of Company
Y and Company Z, relative to each other and their industry average.
Company Z
2 250 000
Company Y
550 000
300 000
40 000
Earnings before interest and tax
Funds from operations
Interest expense
Total debt
Total capital
1 000 000
4 000 000
500 000
Goodwill
Present value of operating leases 300 000
Net pension liability
0
850 000
160 000
2 500 000
6 500 000
Industry average
1 400 000
600 000
100 000
2 400 000
6 000 000
200 000
200 000
0
200 000
Calculate adjusted financial ratios for both companies and the industry, and evaluate the
relative creditworthiness of Company Y and Company Z.
(4)
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