Case analysis of bankruptcy. On October 2, 1975, W. T. Grant Company (Grant) filed for bankruptcy protection under Chapter XI of the Bankruptcy Act. At that time, assets totaled $1.02 billion, and liabilities totaled $1.03 billion. The company

operated at a profit for most years before 1974 but reported an operating loss of $177 million for its fiscal year January 31, 1974, to January 31, 1975. A large por- tion of this loss resulted from a $155.7 million provision of uncollectible accounts receivable. This case uses tools of financial statement analysis to identify the causes of W. T. Grant's bankruptcy. Grant operated a chain of discount retail stores, similar to Wal-Mart and Kmart to- day. Prior to the mid-1960s, Grant located most of its stores in urban centers. With the movement to the suburbs, Grant began a rapid expansion into suburban shopping centers. It added furniture and appliances to its product line to serve the needs of new suburban homeowners. It also offered a credit card to assist customers in financing their purchases.

Exhibits 5.30 through 5.33 contain the following kinds of information:
1. Balance sheets, income statements, and statements of cash flows for W. T. Grant Company for the 1971 through 1975 fiscal periods.
2. Additional financial information about W. T. Grant Company, the retail industry, and the economy for the same period.
Prepare an analysis that explains the major causes of Grant's collapse. Assume an income tax rate of 48 percent.

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INTERNATIONAL PAPER Financial Ratias EXHIBIT 5.27 [Problem 30) Year 8 Year 9 Year 10. Profit Margin Ratio (before interest effects) 4.7% 8.2% 4.7% Total Assets Turnover Ration .87 .95 .77 Rate of Return on Assets 4.1% 7.8% 3.6% Profit Margin (after interest effects) 2.9% 5.8% 2.2% Leverage Ratio 2.71 2.92 3.05 Rate of Return on Common Shareholders' Equity 6.8% 16.1% 5.1% Cost of Goods Sold/Sales. 80.0% 75.4% 79.9% Selling & Administrative Expense/Sales 12.9% 11.9% 13.0% Interest Expense/Sales 2.3% 2.5% 2.6% Income Tax Expense/Sales 3.2% 5.4% 3.2% Accounts Receivable Turnover 7.31 8.23 7.86 Inventory Turnover 5.84 6.14 5.72 Plant Asset Turnover 1.53 1.67 1.33 Current Ratio 1.20 1.21 1.02 Quick Ratio .62 .59 .49 Cash Flow from Operations to Current Liabilities 30.9% 50.5% 32.3% Days Accounts Receivable Outstanding 50 44 46 Days Inventories Held 62 59 64 Days Accounts Payable Outstanding 50 44 46 Long-term Debt Ratio. 40.7% 45.1% 43.3% Debt-Equity Ratio 63.5% 67.5% 66.9% Cash Flow from Operations to Total Liabilities 11.4% 16.3% 9.9% Interest Coverage Ratio.. 3.05 5.11 2.68 Growth Rate in Sales 9.4% 32.3% 1.7% Growth Rate in Cash 11.6% 15.6% 12.8% Growth Rate in Capital Expenditures 34.6% 69.3% 16.7%