Krane Products Inc. is a manufacturer of ski equipment. The company has been in operation since 1997. Ms. Andrews is a credit analyst for an investment management company. She has been asked to analyze Krane Products Inc. as a possible purchase for the bod portfolio of one of the firms's accounts. At the time of the analysis, Krane Product Inc. was rated BB by S&P. The bonds of the company trade in the market with the same spread as other comparable BB bonds. Ms. Andrews collected financial date for Krane Products Inc. for the years 2000 and 1999 and competed several financial ratios.

22. Krane Products Inc. is a manufacturer of ski equipment. The company has been in operation since 1997. Ms. Andrews is a credit analyst for an investment management company. She has been asked to analyze Krar bond portfolio of one of her firm's accounts. At the time of the analysis, Krane Products Inc. was rated BB by S&P. The bonds of the company trade in the market with the same spread as other comparable BB bonds Ms. Andrews collected financial data for KraneProducts Inc. for the vears 2000 and 1999 and computed several financial ratios. Information for selected ratios is given below: 2000 3.8 5.9 28.3% 19.2% 24.4% 1999 2.7 Ratios EBIT interest coverage EBITDA interest coverage Funds from operations/total debt Free operating cash flow/total debt Pretax return on capital Operating income/sales Long-term debt/capitalization Total debt/capitalization 24.5% 1.2% 55.0% 57.1% 19.5% 57.4% 59.5% Based on the first three quarters of fiscal year 2001, Ms. Andrews projected the following ratios for 2001: 2001 4.5 Ratios EBIT interest coverage EBITDA interest coverage Funds from operations/total debt Free operating cash flow/total debt Pretax return on capital Operating income/sales Long-term debt/capitalization Total debt/capitalization 41.5% 225% 24.2% 25.12% 40.5% 45.2%