Shoppers Drug Mart Corporation reported the following selected data (in millions): ______________________________2011 2010 Total assets.............................$7,300.3........$7,044.2 Total liabilities...........................3,032.5.........2,941.6

Question:

Shoppers Drug Mart Corporation reported the following selected data (in millions):

______________________________2011 2010

Total assets.............................$7,300.3........$7,044.2

Total liabilities...........................3,032.5.........2,941.6

Profit.......................................613.9............591.9

Income tax expense.......................232.9............244.8

Interest expense.............................64.0.............60.6

Instructions

(a) Calculate the debt to total assets and interest coverage ratios for 2011 and 2010. Did Shoppers' solvency improve, worsen, or remain unchanged in 2011?

(b) The notes to Shoppers Drug Mart's financial statements show that the company has future operating lease commitments totalling $4.3 billion. What is the significance of these unrecorded obligations when analyzing Shoppers Drug Mart's solvency?

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Solvency means the ability of a business to fulfill its non-current financial liabilities. Often you have heard that the company X went insolvent, this means that the company X is no longer able to settle its noncurrent financial... Corporation
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