year 4 year 3 year 2 current ratio 1.6 1.5 quick ratio 1.2 1.1 operating cash flow to current liabilites ratio 0.479 0.548 days accounts receivable outstanding 68 73 days inventory held 51 68 days accounts payable outstanding 47 49 net days of working capital financing needed 72 91 liabilities to assets ratio 0.556 0.621 liabilities to shareholders' equity ratio 1.251 1.639 long term debt to long term capital ratio 0.328 0.418 long term debt tp shareholders' equity ratio 0.489 0.72 operating cash flow to total liabilities ratio 0.245 0.238 interst coverage ratio 5.6 2.3 c. asses the changes in the long term solvency risk between year 2 and year 4 and the level of that risk at the end of year 4. operations year 4 year 3 year 2 net income $196 175 75 depreciation and amortization 146 164 184 addbacks and subtractions,net 17 68 (67) (increase) Decrease in accounts receivable 76 (13) 34 (increase) Decrease in inventories (16) 35 39 (increase) decrease in prepayments 29 8 185 increase(decrease) in acccounts payable and other current liabililties (90) 17 23 cash flow from operations $358 454 473 investing property, plant, and equipment acquired (79) (63) (59) other investing transactions (6) (2) (3) cash flow from investing (85) (65) (62) financing increase in common stock $3 40 3 decrease in short term borrowing (7) (15) decrease in long term borrowing (58) (389) (127) acquisition of common stock (3) dividends (37) (21) (21) other financing transactions 7 9 12 cash flow from financing (69) (364) -148 change in cash 204 25 263 cash -beginning of year 521 496 233 cash - end of year 725 521 496 year 4 year 3 year 2 sales $2,998 $3,139 $2,816 cost of goods sold (1252) (1288) (1099) selling and administrative expenses advertising (387) (364) (297) research and development (157) (143) (154) royalty expense (223) (248) (296) other selling and administrative (687) (799) (788) interest expense (32) (53) (78) income tax expense (64) (69) (29) Net income $196 $175 $75 year 4 year 3 year 2 year 1 Assets cash $725 $521 $496 $233 Accounts receivable 579 607 555 572 inventories 195 169 190 217 prepayments 219 212 191 346 total current assets $1,718 $1,509 $1,432 $1,368 other assets 1316 1454 1498 1765 total assets $3,241 $3,163 $3,143 $3,369 liabilities and shareholders' equity accounts payable $168 $159 $166 $123 short term borrowing 342 24 223 36 other current liabilities $639 $747 $578 $599 total current liabilities $1,149 $930 967 $758 long term debt $303 $687 $857 $1,166 other non current liabilites $149 $141 128 $92 total liabilities $1,601 $1,748 $1,952 $2,016 comon stock $105 $105 $105 $105 additional paid in capital $381 $398 $458 $455 retained earnings $1,721 $1,567 $1,430 $1,622 accumulated other comprehensive income (loss) $82 $30 ($47) ($68) treasury stock ($649) ($695) ($755) ($761) total shareholders' equity $1,640 $1,405 $1,191 $1,353 total liabilities and shareholder' equity $3,241 $3,163 $3,143 $3,369

year 4 year 3 year 2 current ratio 1.6 1.5 quick ratio 1.2 1.1 operating cash flow to current liabilites ratio 0.479 0.548 days accounts receivable outstanding 68 73 days inventory held 51 68 days accounts payable outstanding 47 49 net days of working capital financing needed 72 91 liabilities to assets ratio 0.556 0.621 liabilities to shareholders' equity ratio 1.251 1.639 long term debt to long term capital ratio 0.328 0.418 long term debt tp shareholders' equity ratio 0.489 0.72 operating cash flow to total liabilities ratio 0.245 0.238 interst coverage ratio 5.6 2.3 c. asses the changes in the long term solvency risk between year 2 and year 4 and the level of that risk at the end of year 4. operations year 4 year 3 year 2 net income $196 175 75 depreciation and amortization 146 164 184 addbacks and subtractions,net 17 68 (67) (increase) Decrease in accounts receivable 76 (13) 34 (increase) Decrease in inventories (16) 35 39 (increase) decrease in prepayments 29 8 185 increase(decrease) in acccounts payable and other current liabililties (90) 17 23 cash flow from operations $358 454 473 investing property, plant, and equipment acquired (79) (63) (59) other investing transactions (6) (2) (3) cash flow from investing (85) (65) (62) financing increase in common stock $3 40 3 decrease in short term borrowing (7) (15) decrease in long term borrowing (58) (389) (127) acquisition of common stock (3) dividends (37) (21) (21) other financing transactions 7 9 12 cash flow from financing (69) (364) -148 change in cash 204 25 263 cash -beginning of year 521 496 233 cash - end of year 725 521 496 year 4 year 3 year 2 sales $2,998 $3,139 $2,816 cost of goods sold (1252) (1288) (1099) selling and administrative expenses advertising (387) (364) (297) research and development (157) (143) (154) royalty expense (223) (248) (296) other selling and administrative (687) (799) (788) interest expense (32) (53) (78) income tax expense (64) (69) (29) Net income $196 $175 $75 year 4 year 3 year 2 year 1 Assets cash $725 $521 $496 $233 Accounts receivable 579 607 555 572 inventories 195 169 190 217 prepayments 219 212 191 346 total current assets $1,718 $1,509 $1,432 $1,368 other assets 1316 1454 1498 1765 total assets $3,241 $3,163 $3,143 $3,369 liabilities and shareholders' equity accounts payable $168 $159 $166 $123 short term borrowing 342 24 223 36 other current liabilities $639 $747 $578 $599 total current liabilities $1,149 $930 967 $758 long term debt $303 $687 $857 $1,166 other non current liabilites $149 $141 128 $92 total liabilities $1,601 $1,748 $1,952 $2,016 comon stock $105 $105 $105 $105 additional paid in capital $381 $398 $458 $455 retained earnings $1,721 $1,567 $1,430 $1,622 accumulated other comprehensive income (loss) $82 $30 ($47) ($68) treasury stock ($649) ($695) ($755) ($761) total shareholders' equity $1,640 $1,405 $1,191 $1,353 total liabilities and shareholder' equity $3,241 $3,163 $3,143 $3,369

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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year 4	year 3	year 2
current ratio			1.6	1.5
quick ratio			1.2	1.1
operating cash flow to current liabilites ratio			0.479	0.548
days accounts receivable outstanding			68	73
days inventory held			51	68
days accounts payable outstanding			47	49
net days of working capital financing needed			72	91
liabilities to assets ratio			0.556	0.621
liabilities to shareholders' equity ratio			1.251	1.639
long term debt to long term capital ratio			0.328	0.418
long term debt tp shareholders' equity ratio			0.489	0.72
operating cash flow to total liabilities ratio			0.245	0.238
interst coverage ratio			5.6	2.3

c. asses the changes in the long term solvency risk between year 2 and year 4 and the level of that risk at the end of year 4.

operations	year 4	year 3	year 2
net income	$196	175	75
depreciation and amortization	146	164	184
addbacks and subtractions,net	17	68	(67)
(increase) Decrease in accounts receivable	76	(13)	34
(increase) Decrease in inventories	(16)	35	39
(increase) decrease in prepayments	29	8	185
increase(decrease) in acccounts payable and other current liabililties	(90)	17	23
cash flow from operations	$358	454	473
investing
property, plant, and equipment acquired	(79)	(63)	(59)
other investing transactions	(6)	(2)	(3)
cash flow from investing	(85)	(65)	(62)
financing
increase in common stock	$3	40	3
decrease in short term borrowing	(7)		(15)
decrease in long term borrowing	(58)	(389)	(127)
acquisition of common stock		(3)
dividends	(37)	(21)	(21)
other financing transactions	7	9	12
cash flow from financing	(69)	(364)	-148
change in cash	204	25	263
cash -beginning of year	521	496	233
cash - end of year	725	521	496

	year 4	year 3	year 2

sales	$2,998	$3,139	$2,816
cost of goods sold	(1252)	(1288)	(1099)
selling and administrative expenses
advertising	(387)	(364)	(297)
research and development	(157)	(143)	(154)
royalty expense	(223)	(248)	(296)
other selling and administrative	(687)	(799)	(788)

interest expense	(32)	(53)	(78)
income tax expense	(64)	(69)	(29)
Net income	$196	$175	$75

	year 4	year 3	year 2	year 1
Assets
cash	$725	$521	$496	$233
Accounts receivable	579	607	555	572
inventories	195	169	190	217
prepayments	219	212	191	346
total current assets	$1,718	$1,509	$1,432	$1,368
other assets	1316	1454	1498	1765
total assets	$3,241	$3,163	$3,143	$3,369
liabilities and shareholders' equity
accounts payable	$168	$159	$166	$123
short term borrowing	342	24	223	36
other current liabilities	$639	$747	$578	$599
total current liabilities	$1,149	$930	967	$758
long term debt	$303	$687	$857	$1,166
other non current liabilites	$149	$141	128	$92
total liabilities	$1,601	$1,748	$1,952	$2,016
comon stock	$105	$105	$105	$105
additional paid in capital	$381	$398	$458	$455
retained earnings	$1,721	$1,567	$1,430	$1,622
accumulated other
comprehensive income (loss)	$82	$30	($47)	($68)
treasury stock	($649)	($695)	($755)	($761)
total shareholders' equity	$1,640	$1,405	$1,191	$1,353
total liabilities and shareholder' equity	$3,241	$3,163	$3,143	$3,369

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