Suppose you are asked to provide an opinion regarding the financial condition and operating performance of a computer manufacturing firm, Wang Laboratories. Wang Laboratories filed for Chapter 11 bankruptcy in 1992 and reemerged a little more than a year later, having shed some of its debt and restructured some of its operations.

Before its bankruptcy, Wang’s lines of business consisted of minicomputers and software services. Following bankruptcy, Wang is more focused on the software services, de-emphasizing the minicomputer lines. Financial data are available for Wang Laboratories just before and after bankruptcy.

Financial ratios for the computer software industry for the corresponding period are as follows:

Requirements: Analyze the financial and operating condition of Wang Laboratories as of the end of the 1995 fiscal year. Use only the financial data from 1990–1995 to develop your analysis. In addition, list and briefly describe any additional information that would be useful in the analysis of Wang Laboratories. In your analysis, be sure to include the following:
■ The types of financial problems experienced by Wang prior to the bankruptcy.
■ A comparison of the financial condition and operating performance from before to after bankruptcy.
■ A comparison of Wang Laboratories’ condition and performance with that of the industry.

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Year ended 9-mos. ended Year ended Year ended Year ended June 30, Balance Sheet 1995 June 30, 1994 June 30, June 30, June 30, 1992 1991 1990 Assets Cash and equivalents $181 $189 $184 $233 $169 Accounts receivable 182 129 344 316 481 Inventories 24 28 118 163 246 Other current assets 37 37 57 110 187 Total current assets $425 $383 $702 $822 $1,082 Depreciable assets, net $134 $80 $316 $495 $732 Intangible assets, net 274 198 0 0 4 Other assets 26 26 47 101 129 Total assets $859 $686 $1,065 $1,418 $1,946 Liabilities Current liabilities $381 $288 $716 $727 $872 Long-term liabilities 32 2 453 500 556 Other liabilities 81 79 184 139 103 Total liabilities $494 $369 $1,352 $1,365 $1,531 Shareholders' equity 366 317 -286 53 415 Total liabilities and equity $859 $686 $1,066 $1,418 $1,946