Hi, I need help with those two questions. I also add the ratings and the ratios at the end. Thanks a lot.
QUESTION 2 Blackmun Corp.'s balance sheet as of Dec 31, 2014 is as follows: [In Millions, Except Per Share Data] Cash : 650 Accounts Receivable : 300 Inventories : 550 Net Plant Assets : 3,379 Goodwill : 120 Total Assets : 4,999 Accounts Payable : 870 Taxes Payable : 25 Short-Term Debt : 100 Long-Term Debt : 1,500 Common stock ($0.10 par) issued : 5 Additional paid in capital : 325 Retained Earnings : 2,324 Treasury Stock, (2000 shares) : (150) Total Stockholders Equity : 2,504 Total liabilities and Equity : 4,999 What bond rating will you assign for Blackmun Corp.? OB CCC AA to AAA A BB QUESTION 3 Staunton Corp.'s financial statement for 2016 are as follows. All figures are in millions, except per share data. BALANCE SHEET: Dec 31, 2016 >>>>> ASSETS >>>>> Cash: 169 Accounts receivable (net): 336 Inventories: 412 Plant and equipment, net of depreciation: 424 Investments, Long-term: 636 Intangible Assets: 112 TOTAL ASSETS: 2,089 LIABILITIES AND EQUITY >>>>> Accounts Payable: $176 Income Taxes Payable: $60 Short-term Debt: $148 Accrued Liabilities: $87 Long-term Debt: $444 Deferred taxes. Long-term: $80 Common stock (no par, 52 shares outstanding): $544 Retained earnings: $600 Treasury stock: $(50) TOTAL LIABILITIES AND EQUITIES: $2,089 Stock Price per share: $71.00 Number of Shares 52.00 INCOME STATEMENT: year ended: $Dec 31, 2016 >>>>> Sales: $3,012 Cost of goods sold: $(2,000) Gross profit: $1,012 Operating expenses: $(470) Operating income: $542 Investment income: $127 Interest expense: $(65) Income before income taxes: $604 Income tax expense: $(202) Net income: $402 The only investments were in Holland Inc. which paid no dividends in 2016. Staunton Corp. used the equity method for accounting for its investment in Holland Corp.. What is the Z-score of Staunton Corp. on Dec 31, 2016? 4.88 to 5.0799 5.08 to 5.2799 5.28 to 5.4799 5.48 to 5.6799 5.68 to 5.8799 RATINGS AND RATIOS Corporate Ratings Criteria CCC ADJUSTED KEY INDUSTRIAL FINANCIAL RATIOS U.S. Industrial long term debt Three-year medians AAA BBB EBIT int.cov. (x) 21.4 10.1 6.1 3.7 EBITDA int cov. (x) 26.5 12.9 9.1 5.8 FFO/total debt (%) 128.8 55.4 43.2 30.8 Free oper. cash flow/total debt (%) 84.2 25.2 15.0 8.5 Return on capital (%) 34.9 21.7 19.4 13.6 Operating income/sales (%) 27.0 22.1 18.6 15.4 Long-term debt/capital (%) 13.3 28.2 33.9 42.5 Total debt/capital (incl. STD) (%) 22.9 37.7 42.5 48.2 Companies 8 29 136 218 BB 2.1 3.4 18.8 2.6 11.6 15.9 57.2 62.6 273 B 0.8 1.8 7.8 (3.2) 6.6 0.1 1.3 1.6 (12.9) 1.0 11.9 11.9 69.7 74.8 281 68.8 87.7 22 Data for earlier years and in greater detail are available by subscribing to Standard & Poor's CreditStats. FORMULAS FOR KEY RATIOS 1. EBIT interest coverage = Earnings from continuing operations before interest and taxes Gross interest incurred before subtracting (1) capitalized interest and (2) interest income 2. EBITDA interest coverage = Earnings from continuing operations* before interest, taxes, depreciation, and amortization Gross interest incurred before subtracting (1) capitalized interest and (2) interest income 3. Funds from operations/total debt = Net income from continuing operations plus depreciation, amortization, deferred income taxes, and other noncash items Long-term debt** plus current maturities, commercial paper, and other short-term borrowings 4. Free operating cash flow/total debt = Funds from operations minus capital expenditures, minus (plus) the increase (decrease) in working capital (excluding changes in cash, marketable securities, and short-term debt) Long-term debt** plus current maturities, commercial paper, and other short-term borrowings 5. Return on capital = EBIT Average of beginning of year and end of year capital, including short-term debt, current maturities, long-term debt**, non-current deferred taxes, and equity. 6. Operating income/sales = Sales minus cost of goods manufactured before depreciation and amortization), selling, general and administrative, and research and development costs Sales 7. Long-term debt/capital = Long-term debt** Long-term debt + shareholders' equity (including preferred stock) plus minority interest 8. Total debt/capital = Long-term debt** plus current maturities, commercial paper, and other short-term borrowings Long-term debt plus current maturities, commercial paper, and other short-term borrowings + shareholders' equity (including preferred stock) plus minority interest *Including interest income and equity earnings, excluding nonrecurring items. **Including amount for onerating lease deht eruivalent QUESTION 2 Blackmun Corp.'s balance sheet as of Dec 31, 2014 is as follows: [In Millions, Except Per Share Data] Cash : 650 Accounts Receivable : 300 Inventories : 550 Net Plant Assets : 3,379 Goodwill : 120 Total Assets : 4,999 Accounts Payable : 870 Taxes Payable : 25 Short-Term Debt : 100 Long-Term Debt : 1,500 Common stock ($0.10 par) issued : 5 Additional paid in capital : 325 Retained Earnings : 2,324 Treasury Stock, (2000 shares) : (150) Total Stockholders Equity : 2,504 Total liabilities and Equity : 4,999 What bond rating will you assign for Blackmun Corp.? OB CCC AA to AAA A BB QUESTION 3 Staunton Corp.'s financial statement for 2016 are as follows. All figures are in millions, except per share data. BALANCE SHEET: Dec 31, 2016 >>>>> ASSETS >>>>> Cash: 169 Accounts receivable (net): 336 Inventories: 412 Plant and equipment, net of depreciation: 424 Investments, Long-term: 636 Intangible Assets: 112 TOTAL ASSETS: 2,089 LIABILITIES AND EQUITY >>>>> Accounts Payable: $176 Income Taxes Payable: $60 Short-term Debt: $148 Accrued Liabilities: $87 Long-term Debt: $444 Deferred taxes. Long-term: $80 Common stock (no par, 52 shares outstanding): $544 Retained earnings: $600 Treasury stock: $(50) TOTAL LIABILITIES AND EQUITIES: $2,089 Stock Price per share: $71.00 Number of Shares 52.00 INCOME STATEMENT: year ended: $Dec 31, 2016 >>>>> Sales: $3,012 Cost of goods sold: $(2,000) Gross profit: $1,012 Operating expenses: $(470) Operating income: $542 Investment income: $127 Interest expense: $(65) Income before income taxes: $604 Income tax expense: $(202) Net income: $402 The only investments were in Holland Inc. which paid no dividends in 2016. Staunton Corp. used the equity method for accounting for its investment in Holland Corp.. What is the Z-score of Staunton Corp. on Dec 31, 2016? 4.88 to 5.0799 5.08 to 5.2799 5.28 to 5.4799 5.48 to 5.6799 5.68 to 5.8799 RATINGS AND RATIOS Corporate Ratings Criteria CCC ADJUSTED KEY INDUSTRIAL FINANCIAL RATIOS U.S. Industrial long term debt Three-year medians AAA BBB EBIT int.cov. (x) 21.4 10.1 6.1 3.7 EBITDA int cov. (x) 26.5 12.9 9.1 5.8 FFO/total debt (%) 128.8 55.4 43.2 30.8 Free oper. cash flow/total debt (%) 84.2 25.2 15.0 8.5 Return on capital (%) 34.9 21.7 19.4 13.6 Operating income/sales (%) 27.0 22.1 18.6 15.4 Long-term debt/capital (%) 13.3 28.2 33.9 42.5 Total debt/capital (incl. STD) (%) 22.9 37.7 42.5 48.2 Companies 8 29 136 218 BB 2.1 3.4 18.8 2.6 11.6 15.9 57.2 62.6 273 B 0.8 1.8 7.8 (3.2) 6.6 0.1 1.3 1.6 (12.9) 1.0 11.9 11.9 69.7 74.8 281 68.8 87.7 22 Data for earlier years and in greater detail are available by subscribing to Standard & Poor's CreditStats. FORMULAS FOR KEY RATIOS 1. EBIT interest coverage = Earnings from continuing operations before interest and taxes Gross interest incurred before subtracting (1) capitalized interest and (2) interest income 2. EBITDA interest coverage = Earnings from continuing operations* before interest, taxes, depreciation, and amortization Gross interest incurred before subtracting (1) capitalized interest and (2) interest income 3. Funds from operations/total debt = Net income from continuing operations plus depreciation, amortization, deferred income taxes, and other noncash items Long-term debt** plus current maturities, commercial paper, and other short-term borrowings 4. Free operating cash flow/total debt = Funds from operations minus capital expenditures, minus (plus) the increase (decrease) in working capital (excluding changes in cash, marketable securities, and short-term debt) Long-term debt** plus current maturities, commercial paper, and other short-term borrowings 5. Return on capital = EBIT Average of beginning of year and end of year capital, including short-term debt, current maturities, long-term debt**, non-current deferred taxes, and equity. 6. Operating income/sales = Sales minus cost of goods manufactured before depreciation and amortization), selling, general and administrative, and research and development costs Sales 7. Long-term debt/capital = Long-term debt** Long-term debt + shareholders' equity (including preferred stock) plus minority interest 8. Total debt/capital = Long-term debt** plus current maturities, commercial paper, and other short-term borrowings Long-term debt plus current maturities, commercial paper, and other short-term borrowings + shareholders' equity (including preferred stock) plus minority interest *Including interest income and equity earnings, excluding nonrecurring items. **Including amount for onerating lease deht eruivalent
