Using the screen shot how would I do question 1 part a-c?

1. Examine AHP's probability of financial distress. To do so, assess the variability of the firms cash flows.

A. For the period 1972-1981, determine the firms's average operating profit margin( OPM) assuming a tax rate of 48%. Assume payments are negligible during the period (debt is close to nil). Assume that an interest income of 8% is earned over the average cash balances of the year.

B. Are yearly OPMs stable or volatile? Is OPM very different than the average during the recessions of 1974-1975 and 1980-1981?

C. Based on this analysis and your reading of the case, is there a low or high probability of entering financial distress in the future due to variability of operating profits?

Thank you

EXHIBIT 1 Sales ($ mill) Cash Total Debt Net Worth Total Assets ($ mill) Net income ($ mill) Earnings per share Dividends per share Annual Growth in Sales Annual Growth in EPS Dividend Payout Ratio After Tax Prot Margin Return on Equity Selected Financial Data for American Home Products Corporation 1972-1981 1981 1980 1979 1978 1977 $4,131.2 $3,798.5 $3,406.3 $3,062.6 $2,665.1 729.1 593.3 493.8 436.6 322.9 16.6 13.9 10.3 13.7 10.3 1654.5 1472.8 1322 1176 1035.3 2566.5 2370.3 2090.7 1862.2 161 1.3 497.3 445.9 396 346.4 306.2 3.16 2.64 2.51 2.21 1.94 $1.90 $1.70 $1.50 $1.33 $1.15 8.8% 11.7% 11.1% 14.1% 6.6% 12.0% 13.1% 13.6% 13.9% 10.9% 59.7% 60.0% 59.8% 60.0% 59.3% 12.0% 11.7% 11.6% 11.4% 11.4% 30.1% 30.3% 30.0% 29.6% 29.5% 1976 $2,471.7 $2,258.6 $2,048.7 $1,784.4 $1,587.1 358.8 7.8 991.5 1510.9 277.9 1.75 $1.00 9.4% 10.8% 57.1% 11.2% 28.0% 1 975 1390.7 250.7 1.58 $0.90 10.2% 11.3% 57.0% 11.1% 27.9% 1974 1241.6 225.6 1.42 $0.76 14.6% 13.6% 54.7% 11.0% 28.2% 1973 1126 199.2 1.25 $0.63 12.4% 15.7% 50.0% 11.2% 23.2% 1 972