You have been presented with the following selected information taken from the financial statements of solvency. Magna International Inc. (in U.S. millions):

Instructions
(a) Calculate each of the following ratios for 2010 and 2009. Industry ratios are shown in parentheses.
1. Current ratio (2010, 1.4:1:1; 2009, 1.4:1)
2. Receivables turnover (2010, 7.1 times; 2009, 6.9 times)
3. Inventory turnover (2010, 9.4 times; 2009, 9.8 times)
4. Debt to total assets (2010, 38.3%; 2009, 41.9%)
5. Times interest earned (2010, 5.3 times; 2009, 6.3 times)
(b) Based on your results in (a), comment on Magna's liquidity and solvency.
(c) Magna had a U.S. $2-billion operating line of credit, of which U.S. $1.9 billion was unused at the end of 2010 and 2009. Discuss the implications of this information for your analysis.
(d) Magna had operating lease commitments totaling U.S. $1,765 million in 2010 and U.S. $1,699 million in 2009. Discuss the implications of this information for your analysis.

Transcribed Image Text:

0 Statement of financial position Accounts receivable 1 8 4 Income statement Cost of goods sold 15,697 3 expense Income tax expense (recovery)