Answered: Assigning a Long-Term Debt Rating Using…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Assigning a Long-Term Debt Rating Using Financial Ratios

Refer to the information below from Stryker’s 2018 financial statements. Use the information to answer the requirements ($ millions).

Revenue	$13,601	Interest expense, gross	$181
Depreciation expense	306	Dividends, including to noncontrolling interest	717
Amortization expense	417	Cash and cash equivalents	3,616
Operating profit (EBIT)	2,537	Marketable securities	83
Total debt	9,859	Average assets	24,713
Cash from operating activities	2,610	CAPEX	572
Funds from operations	2,852

a. Compute the following 10 Moody’s metrics for Stryker for 2018.
Round all answers (except Revenue) to one decimal place (example for percentage ratios: 0.2345 = 23.5%).

Ratio
Debt / EBITDA	Answer
EBITA to interest expense	Answer
Revenue ($ millions)	Answer
Retained Cash Flow / Net Debt	Answer
EBITA margin	Answer
Operating margin	Answer
FFO / Debt	Answer
(FFO + Interest Expense)/Interest Expense	Answer
EBITA to average assets	Answer
CAPEX / Depreciation expense	Answer

b. Use your computations from part a, along with measures in Exhibit 4.8, to estimate the long‑term debt rating for Stryker.

Based on the above computations, the rating for Stryker's long-term debt would fall in the Answer

Save AnswersNext

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions