Calculating and interpreting long-term liquidity ratios. Data taken from the financial statement of Ericsson, a Swedish manufacturer of cellular phone and related infrastructure equipment, appear below (amounts in millions of Swedish kroner).

a. Compute the long-term debt ratio and the debt-equity ratio at the end of Year 2, Year 3, and Year 4.

b. Compute the cash flow from operations to total liabilities ratio and the interest coverage ratio for Year 2 through Year 4.

c. How has the long-term liquidity risk of Ericsson changed over this three-year period?

Transcribed Image Text:

For the Year Year 2 Year 3 Year 4 Net Income before Interest and Income Taxes .. Cash Flow from Operations Interest Expense Kr25,020 Kr24,293 Kr17,191 7,394 12,925 (10,848) 2,532 3,041 5,166 On December 31 Year 1 Year 2 Year 3 Year 4 Long-term Debt Kr14,407 Kr19,667 Kr32,298 Kr35,247 Total Liabilities 103,483 115,152 148,895 180,208 Total Shareholders' Equity 57,364 70,320 85,616 109,217