Griffin and Lasky, Inc. (G&L), supplies industrial automation equipment and machine tools to the automotive industry. G&L recognizes revenue on its long-term contracts over time. Customer orders have long lead times because they involve multiyear capital investment programs. Sometimes orders are canceled. Selected items from the company’s financial statements follow.

Required:

1. Compute earnings before interest, taxes, depreciation, and amortization (EBITDA) and adjusted EBITDA—after excluding the plant write-down—for each year in the schedule.

2. Are profits at G&L keeping pace with sales?

3. Compute the days receivables outstanding using year-end receivables for each year in the schedule.

4. Why might analysts be concerned about earnings quality at G&L?

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($ in millions) 20X1 20X2 20X3 Sales $571.5 $619.5 $730.6 Accounts receivable-billed 141.6 94.5 147.9 Accounts receivable-unbilled 104.5 249.4 202.7 Total accounts receivable 246.1 343.9 350.6 Inventory 57.4 74.8 102.3 75.8 38.1 Earnings before interest and taxes (EBIT) Depreciation and amortization Plant write-down 74.8 14.8 -0- 15.4 19.3 -0- 30.3