Question
Debt Management Ratios Financial statements for Remington Inc. follow. Remington Inc. Consolidated Statements of Income (In thousands except per share amounts) 2013 2012 2011 Net
Debt Management Ratios
Financial statements for Remington Inc. follow.
Remington Inc. | |||||
Consolidated Statements of Income | |||||
(In thousands except per share amounts) | |||||
2013 | 2012 | 2011 | |||
Net sales | $ 7,245,088 | $ 6,944,296 | $ 6,149,218 | ||
Cost of goods sold | (5,286,253) | (4,953,556) | (4,355,675) | ||
Gross margin | $ 1,958,835 | $ 1,990,740 | $ 1,793,543 | ||
General and administrative expenses | (1,259,896) | (1,202,042) | (1,080,843) | ||
Special and nonrecurring items | 2,617 | - | - | ||
Operating income | $ 701,556 | $ 788,698 | $ 712,700 | ||
Interest expense | (63,685) | (62,398) | (63,927) | ||
Other income | 7,308 | 10,080 | 11,529 | ||
Gain on sale of investments | - | 9,117 | - | ||
Income before income taxes | $ 645,179 | $ 745,497 | $ 660,302 | ||
Provision for income taxes | 254,000 | 290,000 | 257,000 | ||
Net income | $ 391,179 | $ 455,497 | $ 403,302 | ||
Net income per share | $1.08 | $1.25 | $1.11 |
Remington Inc. | ||||||
Consolidated Balance Sheets | ||||||
(In thousands) | ||||||
ASSETS | Dec. 31, 2013 | Dec. 31, 2012 | ||||
Current assets: | ||||||
Cash and equivalents | $ 320,558 | $ 41,235 | ||||
Accounts receivable | 1,056,911 | 837,377 | ||||
Inventories | 733,700 | 803,707 | ||||
Other | 109,456 | 101,811 | ||||
Total current assets | $2,220,625 | $1,784,130 | ||||
Property and equipment, net | 1,666,588 | 1,813,948 | ||||
Other assets | 205,342 | 248,372 | ||||
Total assets | $4,092,555 | $3,846,450 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ 250,363 | $ 309,092 | ||||
Accrued expenses | 347,892 | 274,220 | ||||
Other current liabilities | 15,700 | - | ||||
Income taxes | 93,489 | 137,466 | ||||
Total current liabilities | $ 707,444 | $ 720,778 | ||||
Long-term debt | $ 650,000 | $ 541,639 | ||||
Deferred income taxes | 275,101 | 274,844 | ||||
Other long-term liabilities | 61,267 | 41,572 | ||||
Total liabilities | $1,693,812 | $1,578,833 | ||||
Stockholders' equity: | ||||||
Common and preferred stock | $ 189,727 | $ 189,727 | ||||
Additional paid-in capital | 128,906 | 127,776 | ||||
Retained earnings | 2,397,112 | 2,136,794 | ||||
$2,715,745 | $2,454,297 | |||||
Less: Treasury stock, at cost | (317,002) | (186,680) | ||||
Total stockholders' equity | 2,398,743 | $2,267,617 | ||||
Total liabilities and stockholders' equity | 4,092,555 | $3,846,450 |
Required:
Using Remington's financial statements as shown above, respond to the following requirements.
1. Compute the five debt management ratios for 2012 and 2013. Round your answers to two decimal places.
2013 | 2012 | |
Times interest earned | ||
Debt to equity ratio | ||
Debt to total assets ratio | ||
Long-term debt to equity ratio | ||
Long-term debt to total assets ratio |
2. Conceptual Connection: Indicate whether the ratios have changed significantly from 2012 to 2013.
Select All the ratios decreased,Times interest earned ratio decreased, other ratios did not change by much., Debt to equity ratio decreased, other ratios did not change by much., Debt to total assets ratio decreased, other ratios did not change by much, Long-term-debt to equity ratio decreased, other ratios did not change by much, Long-term-debt to total assets ratio decreased, other ratios did not change by much.
B. Do the ratios suggest that Remington is more or less risky for long-term creditors at December 31, 2013, than at December 31, 2012? Explain.
SelectMore risky for long-term creditors Less risky for long-term creditors
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