Selected risk ratios are presented for 2021 and 2020 for Watan Company. Also, refer to the financial statement data for the company. 2021 2020 Revenues to Cash Ratio 6.8 7.7 Days Revenues Held in Cash 54 47 Current Ratio 1.5 1.5 Quick Ratio 1.1 1.1 Operating Cash Flow to Average Current Liabilities Ratio 47.3% 55.7% Days Accounts Receivable 68 73 Days Inventory 51 68 Days Accounts Payable 47 49 Net Days Working Capital 72 91 Liabilities to Assets Ratio 0.559 0.621 Liabilities to Shareholders Equity Ratio 1.266 1.639 Long-Term Debt to Long-Term Capital Ratio 0.330 0.418 Long-Term Debt to Shareholders Equity Ratio 0.492 0.720 Operating Cash Flow to Total Liabilities Ratio 0.243 0.242 Interest Coverage Ratio 5.6 2.3 Financial Statements INCOME STATEMENT (in millions) Fiscal year end 2022 2021 2020 Sales $2,500 $ 3,139 $ 2,816 Cost of Goods Sold (1,252) (1,288) (1,099) Selling, General & Admin. Exp. Advertising (387) (364) (297) Research and Development (157) (143) (154) Royalty Expense (223) (248) (296) Other Selling and Administrative (385) (799) (788) Interest expense (32) (53) (78) Income tax expense (64) (69) (29) Net income $ 196 $ 175 $ 75 Balance Sheet Fiscal year end 2022 2021 2020 2019 ASSETS (in millions) Cash $ 625 $421 $ 496 $233 Accounts Receivable 579 607 555 572 Inventories 195 169 190 217 Prepayments 219 212 191 346 Total current assets $1,618 $1,409 $1,432 $1,368 Property, plant & equipment 207 200 213 236 Other Assets 1,416 1,554 1,498 1,765 Total assets $3,241 $3,163 $3,143 $3,369 LIABILITIES Accounts payable $ 168 $ 159 $ 166 $ 123 Short-term borrowing 342 24 223 36 Other current liabilities 584 749 578 599 Total current liabilities $1,094 $ 939 $ 967 $ 758 Long term debt 303 687 857 1,166 Other noncurrent liabilities 149 141 128 92 Total liabilities $1,546 $1,767 $1,952 $2,016 Common stock $ 105 $ 105 $ 105 $ 105 Additional Paid-in Capital 381 398 458 455 Retained earnings 1,776 1,558 1,430 1,622 Accumulated Other Comprehensive Income 82 30 (47) (68) Treasury Stock (649) (695) (755) (761) Total Shareholders' equity $1,695 $1,396 $1,191 $1,353 Total Liabilities & Shareholders Equity $3,241 $3,163 $3,143 $3,369 STATEMENT OF CASH FLOWS (in millions) Operations 2022 2021 2020 Net Income $ 196 $ 175 $ 75 Depreciation & Amortization 146 164 184 (Increase) Decrease Accounts Receivables 28 (52) 17 (Increase) Decrease Inventories (26) 21 27 (Increase) Decrease Prepayments 7 (21) 155 (Decrease) Increase Accounts Payable & Other Current Liabilities (90) 17 23 Net Addbacks and Subtractions from operations (147) 112 221 Cash flows from operations $ 195 $451 $480 Investing Property Plant and Equipment acquired ($79) ($63) ($59) Other Investing Transactions (6) (2) (3) Cash Flows from Investing ($85) ($65) ($62) Financing Increase in Common Stock 0 0 0 Increase (Decrease) in Short-term Borrowing (318) 199 (187) Increase (Decrease) in Long-term Borrowing (384) (170) 309 Acquisition of Common Stock (46) 60 (6) Dividends (37) (21) (21) Other Financing Transactions 879 243 (250) Cash flow from Financing $94 ($311) ($155) Change in Cash $204 $75 $263 Cash - Beginning of Year 421 496 233 Cash - End of Year $ 625 $ 421 $ 496 Required: a. Calculate the amounts of these ratios for 2022. b. Assess the changes in the short-term liquidity risk of Watan between 2020 and 2022 and the level of that risk at the end of 2022. c. Assess the changes in the long-term solvency risk of Watan between 2020 and 2022 and the level of that risk at the end of 2022

Selected risk ratios are presented for 2021 and 2020 for Watan Company. Also, refer to the financial statement data for the company. Financial Statements Required: a. Calculate the amounts of these ratios for 2022 . b. Assess the changes in the short-term liquidity risk of Watan between 2020 and 2022 and the level of that risk at the end of 2022. c. Assess the changes in the long-term solvency risk of Watan between 2020 and 2022 and the level of that risk at the end of 2022. Solution Selected risk ratios are presented for 2021 and 2020 for Watan Company. Also, refer to the financial statement data for the company. Financial Statements Required: a. Calculate the amounts of these ratios for 2022 . b. Assess the changes in the short-term liquidity risk of Watan between 2020 and 2022 and the level of that risk at the end of 2022. c. Assess the changes in the long-term solvency risk of Watan between 2020 and 2022 and the level of that risk at the end of 2022. Solution