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Selected Risk Ratios Are Presented for 2011 and 2010 for Techtron

question 80

Essay

Selected risk ratios are presented for 2011 and 2010 for Techtron Company. Also, refer to the financial statement data for the company.
$\begin{array}{c}\begin{array}{|l|}\hline\\\hline \text {Revenues to Cash Ratio}\\\hline \text {Days Revenues Held in Cash}\\\hline \text {Curent Ratio}\\\hline \text {Quick Ratio}\\\hline \text {Operating Cash Flow to Average Current Liabilities Ratio}\\\\\hline \text {Days Accounts Receivable}\\\hline \text {Days Inventory}\\\hline \text {Days Accounts P ayable}\\\hline \text {Net Days Working C apital}\\\hline \text {Liabilities to Assets Ratio}\\\hline \text {Liabilities to Shareholders' Equity Ratio}\\\hline \text {Long Term Debt to Long Term Capital Ratio}\\\hline \text {Long Term Debt to Shareholders' Equity Ratio}\\\hline \text {Operating C ash Flow to Total Liabilities Ratio}\\\hline \text {Interest Coverage Ratio}\\\hline \end{array}\begin{array}{l|}\hline 2011 \\\hline 5.8 \\\hline 54 \\\hline 1.5 \\\hline 1.1 \\\hline\\ 47.3 \% \\\hline 58 \\\hline 51 \\\hline 47 \\\hline 72 \\\hline 0.559 \\\hline 1.266 \\\hline 0.330 \\\hline 0.492 \\\hline 0.243 \\\hline 5.6 \\\hline \end{array}\begin{array}{l|}\hline 2010 \\\hline 7.7 \\\hline 47\\\hline 1.5 \\\hline 1.1 \\\hline\\ 55.7 \% \\\hline 73 \\\hline 68 \\\hline 49 \\\hline 91 \\\hline 0.621 \\\hline 1.639 \\\hline 0.418 \\\hline 0.720 \\\hline 0.242 \\\hline 2.3 \\\hline\end{array}\end{array}$
Financial Statements
$\text { INCOML STATEMLNT (in IHbILS) }$
$\begin{array}{c}\begin{array}{lll} \text {Fiscal year end}\\ \text {Sales}\\ \text {Cost of Goods Sold}\\ \text {Selling, General \& Admin. Exp.}\\ \text {Advertising}\\ \text {Research and Development}\\ \text {Royalty Expense}\\ \text {Other Selling and Admiristrative}\\ \text {Interest expense}\\ \text {Income tax expense}\\ \text {Net income} \end{array}\begin{array}{lll}2012\\\$ 2,500 \\\underline{(1,252) }\\\\(387)\\(157)\\(223)\\(385)\\(32)\\\underline{(64)}\\\underline{\$196} \end{array}\begin{array}{l}2011 \\\$ 3,139 \\\underline{(1,288) }\\\\(364) \\(143) \\(248) \\(799) \\(53) \\\underline{(69)}\\\underline{\$175} \end{array}\begin{array}{l}2010 \\\$ 2,81 6\\\underline{(1,099) }\\\\(297) \\(154) \\(290) \\(788) \\(78) \\\underline{(29)}\\\underline{\$75} \end{array}\end{array}$
$Selected risk ratios are presented for 2011 and 2010 for Techtron Company. Also, refer to the financial statement data for the company. \begin{array}{c} \begin{array}{|l|} \hline\\ \hline \text {Revenues to Cash Ratio}\\ \hline \text {Days Revenues Held in Cash}\\ \hline \text {Curent Ratio}\\ \hline \text {Quick Ratio}\\ \hline \text {Operating Cash Flow to Average Current Liabilities Ratio}\\ \\ \hline \text {Days Accounts Receivable}\\ \hline \text {Days Inventory}\\ \hline \text {Days Accounts P ayable}\\ \hline \text {Net Days Working C apital}\\ \hline \text {Liabilities to Assets Ratio}\\ \hline \text {Liabilities to Shareholders' Equity Ratio}\\ \hline \text {Long Term Debt to Long Term Capital Ratio}\\ \hline \text {Long Term Debt to Shareholders' Equity Ratio}\\ \hline \text {Operating C ash Flow to Total Liabilities Ratio}\\ \hline \text {Interest Coverage Ratio}\\ \hline \end{array} \begin{array}{l|} \hline 2011 \\ \hline 5.8 \\ \hline 54 \\ \hline 1.5 \\ \hline 1.1 \\ \hline\\ 47.3 \% \\ \hline 58 \\ \hline 51 \\ \hline 47 \\ \hline 72 \\ \hline 0.559 \\ \hline 1.266 \\ \hline 0.330 \\ \hline 0.492 \\ \hline 0.243 \\ \hline 5.6 \\ \hline \end{array} \begin{array}{l|} \hline 2010 \\ \hline 7.7 \\ \hline 47\\ \hline 1.5 \\ \hline 1.1 \\ \hline\\ 55.7 \% \\ \hline 73 \\ \hline 68 \\ \hline 49 \\ \hline 91 \\ \hline 0.621 \\ \hline 1.639 \\ \hline 0.418 \\ \hline 0.720 \\ \hline 0.242 \\ \hline 2.3 \\ \hline \end{array} \end{array} Financial Statements \text { INCOML STATEMLNT (in IHbILS) } \begin{array}{c} \begin{array}{lll} \text {Fiscal year end}\\ \text {Sales}\\ \text {Cost of Goods Sold}\\ \text {Selling, General \& Admin. Exp.}\\ \text {Advertising}\\ \text {Research and Development}\\ \text {Royalty Expense}\\ \text {Other Selling and Admiristrative}\\ \text {Interest expense}\\ \text {Income tax expense}\\ \text {Net income} \end{array} \begin{array}{lll} 2012\\ \$ 2,500 \\ \underline{(1,252) }\\ \\ (387)\\ (157)\\ (223)\\ (385)\\ (32)\\ \underline{(64)}\\ \underline{\$196} \end{array} \begin{array}{l} 2011 \\ \$ 3,139 \\ \underline{(1,288) }\\ \\ (364) \\ (143) \\ (248) \\ (799) \\ (53) \\ \underline{(69)}\\ \underline{\$175} \end{array} \begin{array}{l} 2010 \\ \$ 2,81 6\\ \underline{(1,099) }\\ \\ (297) \\ (154) \\ (290) \\ (788) \\ (78) \\ \underline{(29)}\\ \underline{\$75} \end{array} \end{array} 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.$ $Selected risk ratios are presented for 2011 and 2010 for Techtron Company. Also, refer to the financial statement data for the company. \begin{array}{c} \begin{array}{|l|} \hline\\ \hline \text {Revenues to Cash Ratio}\\ \hline \text {Days Revenues Held in Cash}\\ \hline \text {Curent Ratio}\\ \hline \text {Quick Ratio}\\ \hline \text {Operating Cash Flow to Average Current Liabilities Ratio}\\ \\ \hline \text {Days Accounts Receivable}\\ \hline \text {Days Inventory}\\ \hline \text {Days Accounts P ayable}\\ \hline \text {Net Days Working C apital}\\ \hline \text {Liabilities to Assets Ratio}\\ \hline \text {Liabilities to Shareholders' Equity Ratio}\\ \hline \text {Long Term Debt to Long Term Capital Ratio}\\ \hline \text {Long Term Debt to Shareholders' Equity Ratio}\\ \hline \text {Operating C ash Flow to Total Liabilities Ratio}\\ \hline \text {Interest Coverage Ratio}\\ \hline \end{array} \begin{array}{l|} \hline 2011 \\ \hline 5.8 \\ \hline 54 \\ \hline 1.5 \\ \hline 1.1 \\ \hline\\ 47.3 \% \\ \hline 58 \\ \hline 51 \\ \hline 47 \\ \hline 72 \\ \hline 0.559 \\ \hline 1.266 \\ \hline 0.330 \\ \hline 0.492 \\ \hline 0.243 \\ \hline 5.6 \\ \hline \end{array} \begin{array}{l|} \hline 2010 \\ \hline 7.7 \\ \hline 47\\ \hline 1.5 \\ \hline 1.1 \\ \hline\\ 55.7 \% \\ \hline 73 \\ \hline 68 \\ \hline 49 \\ \hline 91 \\ \hline 0.621 \\ \hline 1.639 \\ \hline 0.418 \\ \hline 0.720 \\ \hline 0.242 \\ \hline 2.3 \\ \hline \end{array} \end{array} Financial Statements \text { INCOML STATEMLNT (in IHbILS) } \begin{array}{c} \begin{array}{lll} \text {Fiscal year end}\\ \text {Sales}\\ \text {Cost of Goods Sold}\\ \text {Selling, General \& Admin. Exp.}\\ \text {Advertising}\\ \text {Research and Development}\\ \text {Royalty Expense}\\ \text {Other Selling and Admiristrative}\\ \text {Interest expense}\\ \text {Income tax expense}\\ \text {Net income} \end{array} \begin{array}{lll} 2012\\ \$ 2,500 \\ \underline{(1,252) }\\ \\ (387)\\ (157)\\ (223)\\ (385)\\ (32)\\ \underline{(64)}\\ \underline{\$196} \end{array} \begin{array}{l} 2011 \\ \$ 3,139 \\ \underline{(1,288) }\\ \\ (364) \\ (143) \\ (248) \\ (799) \\ (53) \\ \underline{(69)}\\ \underline{\$175} \end{array} \begin{array}{l} 2010 \\ \$ 2,81 6\\ \underline{(1,099) }\\ \\ (297) \\ (154) \\ (290) \\ (788) \\ (78) \\ \underline{(29)}\\ \underline{\$75} \end{array} \end{array} 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.$ 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.

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