Yellow Hammer Corporation Income Statement Year Ended December 31 (in $ millions) 2020 2019 2018 176.1 165.4 140.6 24.8 147.3 28.8 13.0 7.6 Total sales Cost of sales Gross Profit Selling, general, and administrative expenses Research and development Depreciation and amortization Operating Income Interest income (expense) Pretax Income Taxes Net Income 186.7 153.4 33.3 13.5 8.2 1.2 10.4 2.3 8.1 2.0 6.1 11.6 6.4 1.0 1.1 7.1 5.8 1.8 5.3 1.6 4.2 1.1 1.3 4.0 3.2 Yellow Hammer Corporation Consolidated Balance Sheet Year Ended December 31 (in 5 millions) Assets 2020 2019 2020 2019 21.2 19.5 29.2 24.5 Current Assets Cash Accounts receivable Inventories 18.5 13.2 Liabilities and Stockholders' Equity Current Liabilities Accounts payable Notes payable/short-term debt Current maturies of long-term debt Other current liabilities Total current liabilities 13.2 3.2. 15.3 14.3 1.2 1.2 2.0 1.0 2.0 4.0 Other current assets Total current assets 57.0 48.0 45.6 44.0 22.2 20.7 Long-Term Liabilities Long-term debt Deferred taxes 14.4 15.6 36.5 30.5 7.6 7.4 Long-Term Assets Land Buildings Equipment Less accumulated depreciation Net property, plant, and equipment Goodwill and intangible assets 39.7 33.2 Total long-term liabilities 22.0 23.0 - 18.7 - 17.5 79.7 66.9 Total Liabilities 67.6 55.9 20.0 20.0 Stockholders' Equity 110.2 93.0 21.0 14.0 Other long-term assets Total long-term assets 120.7 100.9 Total Liabilities and Stockholders' Equity 177.7 148.9 Total assets 177.7 148.9 Credit Analysis 15 points Use for financial statements for Yellow Hammer to answer problems 1-3 1. Assess Yellow Hammer's income statement by calculating the sales growth, EBITDA profitability (EBITDA/Sales) and coverage ratios using EBIT and EBITDA for each year. SHOW YOUR WORK (5 points) 2. Assess Yellow Hammer's balance sheet by calculating the leverage ratios using of Debt/Capitalization and Debt/EBITDA. SHOW YOUR WORK (5 points) 3. Using the table below and the ratios that you've calculated, insert the EBIT interest coverage, EBITDA interest coverage, Debt/EBITDA and Debt to Capitalization and then provide an assessment of Yellow Hammer's credit quality. SHOW YOUR WORK (5 points) AA A BBB BB B 32.1 19.1 17.1 20.4 15.3 19.7 16.8 12.0 9.5 72 13.1 8.1 45 3.0 13 17.9 11.6 7.1 4.9 25 Oper income (bef. D&A)/revenues () Return on capital (%) EBIT interest coverage (x) EBITDA interest coverage (x) FFO/debt (%) Free oper cash flow/debt (%) Disc.cash flow/debt (%) Debt/EBITDA (x) Debt/debt plus equity (%) 72.3 53.0 34.5 24.0 10.4 43.9 28.4 15.5 9.0 29 18.3 10.6 6.9 3.9 0.4 1.0 1.4 2.1 2.9 5.1 21.0 32.1 42.2 47.4 702