Compute and Interpret Liquidity, Solvency and Coverage Ratios Selected balance sheet and income statement information from Verizon Communications Inc. follows.

$ millions 2016 2015 Current assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,395 $ 22,355 Current liabilities. . . . . . . . . . . . . . . . . . . . . . . . 30,340 35,052 Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,078 109,729 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 220,148 226,333 Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,032 17,842 Earnings before interest and taxes. . . . . . . . . . 27,059 33,060 Interest expense. . . . . . . . . . . . . . . . . . . . . . . . 4,376 4,920 Net cash flow from operating activities . . . . . . 22,715 38,930 Required

a. Compute the current ratio for each year and discuss any trend in liquidity. What additional information about the numbers used to compute this ratio might be useful in helping you assess liquidity? Explain.

b. Compute times interest earned, total liabilities-to-equity, and cash from operations to total debt ratios for each year and discuss any trends for each. Do you have any concerns about the extent of Verizon’s financial leverage and the company’s ability to meet interest obligations? Explain.

c. Verizon’s capital expenditures are expected to increase substantially as it seeks to respond to competitive pressures to upgrade the quality of its communications infrastructure. Assess Verizon’s liquidity and solvency in light of this strategic direction.