Financial Analysis Problem Parker Hannifin Corporation, headquartered in Cleveland, Ohio,

manufactures motion control and fluid system components for a variety of industrial users. The

firms financial statements contain the following data (Year 3 is the most recent year; dollar

amounts are in thousands):

Year 3 Year 2 Year 1

Current assets at year-end. . . . . . . . . . . . . . . . . . . . . . . . . $1,018,354 $1,056,443 $1,055,776

Current liabilities at year-end . . . . . . . . . . . . . . . . . . . . . . . 504,444 468,254 358,729

Current liabilities at beginning of year . . . . . . . . . . . . . . . . 468,254 358,729 345,594

Cash provided by operating activities . . . . . . . . . . . . . . . . 259,204 229,382 235,186

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,914 91,484 84,955

a. Calculate Parker Hannifins current ratio (current assets/current liabilities) for Years 1, 2, and 3.

b. Calculate Parker Hannifins operating-cash-flow-to-current-liabilities ratio for Years 1, 2, and 3.

c. Comment on the three-year trend in Parker Hannifins current ratio and operating-cash-flow-

to-current-liabilities ratio. Do the trends in these two ratios reinforce each other or contradict

each other as indicators of Parker Hannifins ability to pay its current liabilities?

d. Calculate Parker Hannifins operating-cash-flow-to-capital-expenditures ratio for Years 1, 2,

and 3. Comment on the strength of this ratio over the three-year period.