1.Harold Adams is a financial analyst reviewing the financial data for Butler, Inc., for the years 1999, 2000, and 2001. Information for several selected ratios are given below: Table 1 Selected Data on Butler, Inc. | Ratios | 2001 | 2000 | 1999 | EBIT interest Coverage Ratio | 19.5 | 17.2 | 13.7 | EBITDA interest coverage | 10.0 | 9.0 | 8.0 | Funds from Operations/TD | 48.0 | 48.0 | 55.0 | Free Operating Cash Flow/TD | NA | NA | NA | Pretax Return on Capital | 26.0 | 24.1 | 18.5 | Operating Income/Sales | 36.0 | 36.5 | 37.8 | LTD/Capitalization | 29.0 | 28.9 | 31.8 | TD/Capitalization | 45.0 | 58.0 | 60.2 |
Adams obtained Standard and Poor's information about median ratios by credit rating. These ratios are reproduced below: Table 2 Standard & Poor's Select Median Rating Criteria | Ratios | AAA | AA | A | BBB | BB | B | EBIT interest Coverage Ratio | 12.9 | 9.2 | 7.2 | 4.1 | 2.5 | 1.2 | EBITDA interest coverage | 18.7 | 14.0 | 10.0 | 6.3 | 3.9 | 2.3 | Funds from Operations/TD | 89.7 | 67.0 | 49.5 | 32.3 | 20.1 | 10.5 | Free Operating Cash Flow/TD | 40.5 | 21.6 | 17.4 | 6.3 | 1.0 | (4.0) | Pretax Return on Capital | 30.6 | 25.1 | 19.6 | 15.4 | 12.6 | 9.2 | Operating Income/Sales | 30.9 | 25.2 | 17.9 | 15.8 | 14.4 | 11.2 | LTD/Capitalization | 21.4 | 29.3 | 33.3 | 40.8 | 55.3 | 68.8 | TD/Capitalization | 31.8 | 37.0 | 39.2 | 46.4 | 58.5 | 71.4 |
What would most likely be the result if Butler were to provide Adams with additional 1999 data? It would: A) provide a stronger basis for a decision concerning the firm's rating. B) distort the financial trend for Butler, Inc. C) render the year 2001 data invalid. D) provide no additional value for the analyst. The correct answer was A) Additional historical trend information can increase Mr. Adams' confidence in his projections for the firm's credit rating. | 
发表于 2008-4-14 14:13
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