ONLY ANSWER B.

Below is selected balance sheet and income statement information from Scott & Company.

(in millions)	2014	2012
Cash	$ 1,483.36	$ 1,536.73
Accounts receivable	735.30	1,097.16
Current assets	2,918.33	3,913.56
Current liabilities	6,157.95	3,385.39
Long-term debt	3,611.63	17,620.81
Short-term debt	4,568.83	1,033.96
Total liabilities	26,363.17	23,218.42
Interest expense	1,338.29	1,566.90
Capital expenditures	211.50	1,545.48
Equity	-7,152.90	4,587.67
Cash from operations	185.98	110.89
Earnings before interest and taxes	1,902.84	1,594.84

a. Compute the following liquidity, solvency and coverage ratios for both years.

• Current ratio (2014, 2012)
• Liabilities-to-equity (2014, 2012)
• Times interest earned (2014, 2012)
• Cash from operations to total debt (2014, 2012)
• Free operating cash flow to total debt (2014, 2012)

Current Ratio = current assets / Current liabilities 2014 = 2,918.33 / 6,157.95 = 0.47 2012 = 3,913.56 / 3,385.39 = 1.16

Liabilities to Equity ratio = Total Liabilities / Total Equity 2014 = 26,363.17 / -7,152.90 = - 3.69 2012 = 23,218.42 / 4,587.67 = 5.06

Times interest earned = EBIT / Interest expense 2014 = 1,902.84 / 1,338.29 = 1.42 2012 = 1,594.84 / 1,566.90 = 1.02

Cash from operation to total debt = Cash from operation / Debt 2014 = 185.98 / (3,611.63 + 4,568.83) = 0.02 2012 = 110.89 /(17,620.81 + 1,033.96) = 0.01

Free operating cash flow to total deb = (Cash from operation - Capital expenditures) / Debt 2014 = (185.98 - 211.50) / (3,611.63 + 4,568.83) = - 0.003 2012 = (110.89 - 1,545.48) /(17,620.81 + 1,033.96) = - 0.077

b. What is your overall assessment of the companys credit risk? Explain. What differences do you observe between the two years? Please be brief.