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Q13. The long-term debt to total capitalization ratio for Greeno Company is:
A) 4.60 times.
B) 21.7%.
C) 27.8%.
Q14. The interest coverage ratio for Greeno is closest to:
A) 9.3 times.
B) 4.0 times.
C) 6.6 times.
Q15. Assume that Greeno's bonds are currently rated A by all the major rating agencies. On the basis of only the information provided in this series of questions, Adams should advise clients to:
A) buy Greeno bonds in anticipation of a rating upgrade.
B) sell Greeno bonds in anticipation of a rating downgrade.
C) hold Greeno bonds because they are fairly valued at their current levels.
Q16. Each of the following statements is an integral part of the debt rating process EXCEPT:
A) calculate the company's solvency, capitalization, and coverage ratios.
B) compare the effects of earnings per share dilution of the firm under analysis to other firm's within the industry with respect to recent equity issuances.
C) compare the company's solvency, capitalization, and coverage ratios to the average ratios of other firms in various rating categories.
Q17. Harold Adams is a financial analyst reviewing the financial data for Butler, Inc., for the years 2006 and 2005 and projected for 2007. Information for several selected ratios are given below:
|
Table 1: Selected Data on Butler, Inc. |
|
Ratios |
2007 (Projected) |
2006 |
2005 |
|
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/Total debt (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 |
Butler 's year 2007 EBITDA interest coverage is closest to which of the following bond ratings?
A) AA.
B) A.
C) BBB. | 
发表于 2009-3-13 17:54
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