Q22. Using the information in scenario three, what should Mansted observe about Donner’s solvency and debt capitalization?
A) Both Donner's solvency and debt capitalization ratios are better than the industry average.
B) Donner's solvency ratio is worse but its debt capitalization is better than the industry average.
C) Donner's solvency ratio is better but its debt capitalization is worse than the industry average.
Q23. Using the information in scenario three, what should Mansted observe about Donner’s ability to make its interest payments? Donner’s interest coverage ratio is:
A) declining (worsening) over time and is below the industry average.
B) rising (improving) over time and is above the industry average.
C) declining (worsening) over time but is still above the industry average.
Q24. 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 |
|
Earnings before interest and taxes (EBIT) interest Coverage Ratio |
19.5 |
17.2 |
13.7 |
|
Earnings before interest, taxes, depreciation and amortization (EBITDA) interest coverage |
10.0 |
9.0 |
8.0 |
|
Funds from Operations/Total debt (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 |
|
Long-term debt (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) provide no additional value for the analyst. | 
发表于 2009-3-14 17:33
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