PART F: Analysis of Liabilities d$)$ Analyze the company's long$-$term solvency based on the numbers you calculated in $($c$).$

Identify other sources of information that would make your analysis even better.

e$)$ The CEO of J&J$\text{'}$s says that debt is bad and is considering buying back and getting rid of

all the company's debt. Are they correct in their thinking? Why or why not?

The following information has been selected from J&J$\text{'}$s financial statements:

$\backslash$table$[[$BALANCE SHEET$],[$Current Assets:,$],[$Cash$,$$$500,000],[$Accounts Receivable,$800,000],[$Equity Investments,$200,000],[\backslash$table$[[$Inventory$]],2,000,000],[$TOTAL CURRENT ASSETS,$3,500,000],[$TOTAL ASSETS,$13,000,000],[$Current Liabilities:,:$\text{'}],[$Accounts Payable,$1,000,000],[$Short$-$term Notes Payable,$500,000],[$Current Portion of Long$-$term Debt,$300,000],[$TOTAL CURRENT LIABILITIES:,$1,800,000],[$Non$-$Current Liabilities:,$],[$Bonds Payable,$6,000,000],[$Mortgages Payable,$500,000],[$TOTAL NON$-$CURRENT LIABILITIES:,$6,500,000],[,$STATEMENT$],[$EBIT$,$$$400,000],[$Interest Expense,$50,000]]$

Instructions:

a$)$ Calculate the ratios that would matter to a short$-$term creditor: Working capital, current ratio, and the acid ratio.

b$)$ Analyze the company's short$-$term debt paying ability based on the numbers you calculated in $($a$).$ Identify other sources of information that would make your analysis even better.

c$)$ Calculate the ratios that would matter to a long$-$term creditor: Debt ratio, interest coverage ratio.

d$)$ Analyze the company's long$-$term solvency based on the numbers you calculated in $($c$).$ Identify other sources of information that would make your analysis even better.

e$)$ The CEO of J&J$\text{'}$s says that debt is bad and is considering buying back and getting rid of all the company's debt. Are they correct in their thinking? Why or why not?