6. Selected risk ratios are presented for 2011 and 2010 for Techtron Company. Also, refer to the financial statement data for the company.
|
|
2011 |
2010 |
|
Revenues to Cash Ratio |
6.8 |
7.7 |
|
Days Revenues Held in Cash |
54 |
47 |
|
Current Ratio |
1.5 |
1.5 |
|
Quick Ratio |
1.1 |
1.1 |
|
Operating Cash Flow to Average Current Liabilities Ratio |
47.3% |
55.7% |
|
Days Accounts Receivable |
68 |
73 |
|
Days Inventory |
51 |
68 |
|
Days Accounts Payable |
47 |
49 |
|
Net Days Working Capital |
72 |
91 |
|
Liabilities to Assets Ratio |
0.559 |
0.621 |
|
Liabilities to Shareholders’ Equity Ratio |
1.266 |
1.639 |
|
Long-Term Debt to Long-Term Capital Ratio |
0.330 |
0.418 |
|
Long-Term Debt to Shareholders’ Equity Ratio |
0.492 |
0.720 |
|
Operating Cash Flow to Total Liabilities Ratio |
0.243 |
0.242 |
|
Interest Coverage Ratio |
5.6 |
2.3 |
Financial Statements
|
INCOME STATEMENT (in millions) |
|
|
|
|
|
|
|
|
|
Fiscal year end |
2012 |
2011 |
2010 |
|
Sales |
$2,500 |
$ 3,139 |
$ 2,816 |
|
Cost of Goods Sold |
(1,252) |
(1,288) |
(1,099) |
|
Selling, General & Admin. Exp. |
|
|
|
|
Advertising |
(387) |
(364) |
(297) |
|
Research and Development |
(157) |
(143) |
(154) |
|
Royalty Expense |
(223) |
(248) |
(296) |
|
Other Selling and Administrative |
(385) |
(799) |
(788) |
|
Interest expense |
(32) |
(53) |
(78) |
|
Income tax expense |
(64) |
(69) |
(29) |
|
Net income |
$ 196 |
$ 175 |
$ 75 |
|
Balance Sheet |
|
|
|
|
|
Fiscal year end |
2012 |
2011 |
2010 |
2009 |
|
ASSETS (in millions) |
|
|
|
|
|
Cash |
$ 625 |
$421 |
$ 496 |
$233 |
|
Accounts Receivable |
579 |
607 |
555 |
572 |
|
Inventories |
195 |
169 |
190 |
217 |
|
Prepayments |
219 |
212 |
191 |
346 |
|
Total current assets |
$1,618 |
$1,409 |
$1,432 |
$1,368 |
|
Property, plant & equipment |
207 |
200 |
213 |
236 |
|
Other Assets |
1,416 |
1,554 |
1,498 |
1,765 |
|
Total assets |
$3,241 |
$3,163 |
$3,143 |
$3,369 |
|
LIABILITIES |
|
|
|
|
|
Accounts payable |
$ 168 |
$ 159 |
$ 166 |
$ 123 |
|
Short-term borrowing |
342 |
24 |
223 |
36 |
|
Other current liabilities |
584 |
749 |
578 |
599 |
|
Total current liabilities |
$1,094 |
$ 939 |
$ 967 |
$ 758 |
|
Long term debt |
303 |
687 |
857 |
1,166 |
|
Other noncurrent liabilities |
149 |
141 |
128 |
92 |
|
Total liabilities |
$1,546 |
$1,767 |
$1,952 |
$2,016 |
|
|
|
|
|
|
|
Common stock |
$ 105 |
$ 105 |
$ 105 |
$ 105 |
|
Additional Paid-in Capital |
381 |
398 |
458 |
455 |
|
Retained earnings |
1,776 |
1,558 |
1,430 |
1,622 |
|
Accumulated Other Comprehensive Income |
82 |
30 |
(47) |
(68) |
|
Treasury Stock |
(649) |
(695) |
(755) |
(761) |
|
Total Shareholders' equity |
$1,695 |
$1,396 |
$1,191 |
$1,353 |
|
Total Liabilities & Shareholders’ Equity |
$3,241 |
$3,163 |
$3,143 |
$3,369 |
|
STATEMENT OF CASH FLOWS (in millions) |
|
|
|
|
|
|
|
|
|
Operations |
2012 |
2011 |
2010 |
|
Net Income |
$ 196 |
$ 175 |
$ 75 |
|
Depreciation & Amortization |
146 |
164 |
184 |
|
(Increase) Decrease Accounts Receivables |
28 |
(52) |
17 |
|
(Increase) Decrease Inventories |
(26) |
21 |
27 |
|
(Increase) Decrease Prepayments |
7 |
(21) |
155 |
|
(Decrease) Increase Accounts Payable & Other Current Liabilities |
(90) |
17 |
23 |
|
Net Addbacks and Subtractions from operations |
(147) |
112 |
221 |
|
Cash flows from operations |
$ 195 |
$451 |
$480 |
|
Investing |
|
|
|
|
Property Plant and Equipment acquired |
($79) |
($63) |
($59) |
|
Other Investing Transactions |
(6) |
(2) |
(3) |
|
Cash Flows from Investing |
($85) |
($65) |
($62) |
|
Financing |
|
|
|
|
Increase in Common Stock |
0 |
0 |
0 |
|
Increase (Decrease) in Short-term Borrowing |
(318) |
199 |
(187) |
|
Increase (Decrease) in Long-term Borrowing |
(384) |
(170) |
309 |
|
Acquisition of Common Stock |
(46) |
60 |
(6) |
|
Dividends |
(37) |
(21) |
(21) |
|
Other Financing Transactions |
879 |
243 |
(250) |
|
Cash flow from Financing |
$94 |
($311) |
($155) |
|
Change in Cash |
$204 |
$75 |
$263 |
|
Cash - Beginning of Year |
421 |
496 |
233 |
|
Cash - End of Year |
$ 625 |
$ 421 |
$ 496 |
Required:
a. Calculate the amounts of these ratios for 2012.
b. Assess the changes in the short-term liquidity risk of Techtron between 2010 and
2012 and the level of that risk at the end of 2012.
c. Assess the changes in the long-term solvency risk of Techtron between 2010 and
2012 and the level of that risk at the end of 2012.