Compute and Interpret Liquidity, Solvency and Coverage Ratios Selected balance sheet and income statement information for...

 

 

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Compute and Interpret Liquidity, Solvency and Coverage Ratios Selected balance sheet and income statement information for Starbucks for 2018 and 2017 follows. ($ millions) 2018 2017 Cash $ 8,756.3 $2,462.3 Short-term investments 181.5 228.6 Accounts receivable 693.1 870.4 Current assets 12,494.2 5,283.4 Current liabilities 5,684.2 4,220.7 Short-term debt 349.9 Long-term debt 9,090.2 3,932.6 Total liabilities 22,980.6 8,908.6 Interest expense 170.3 92.5 Capital expenditures 1,976.4 1,519.4 Equity 1,175.8 5,457.0 Cash from operations 11,937.8 4,251.8 Earnings before interest and taxes 3,883.3 4,134.7 (a) Compute the following liquidity, solvency and coverage ratios for both years. Round all your answers to two decimal places. 2018 current ratio = 2017 current ratio = 2018 quick ratio = 2017 quick ratio = 2018 liabilities-to-equity = 2017 liabilities-to-equity = 2018 total debt-to-equity = 2017 total debt-to-equity = 2018 times interest earned = 2017 times interest earned 2018 cash from operations to total debt = 2017 cash from operations to total debt = 2018 free operating cash flow to total debt = 2017 free operating cash flow to total debt = (b) Which of the following best describes the company's credit risk? OBoth the quick and current ratios for 2018 decreased in the past year but are higher than 1.0. Its interest coverage ratio remains high, indicating it has it may have difficulty making interest payments on its debt. OBoth the quick and current ratios for 2018 increased in the past year and are higher than 1.0, implying Starbucks is relatively liquid. Starbucks' interest coverage ratio decreased but remains high, indicating it has the ability to cover interest payments on its debt. OBoth the quick and current ratios for 2018 decreased in the past year indicating Starbucks may have may have difficulty converting assets to cash. However, its interest coverage ratio remains high, indicating it has the ability to cover interest payments on its debt. OBoth the quick and current ratios for 2018 increased in the past year and are higher than 1.0, implying Strabucks is relatively liquid. Starbucks' interest coverage ratio is weak, indicating it may have difficulty making interest payments on its debt. Compute and Interpret Liquidity, Solvency and Coverage Ratios Selected balance sheet and income statement information for Starbucks for 2018 and 2017 follows. ($ millions) 2018 2017 Cash $ 8,756.3 $2,462.3 Short-term investments 181.5 228.6 Accounts receivable 693.1 870.4 Current assets 12,494.2 5,283.4 Current liabilities 5,684.2 4,220.7 Short-term debt 349.9 Long-term debt 9,090.2 3,932.6 Total liabilities 22,980.6 8,908.6 Interest expense 170.3 92.5 Capital expenditures 1,976.4 1,519.4 Equity 1,175.8 5,457.0 Cash from operations 11,937.8 4,251.8 Earnings before interest and taxes 3,883.3 4,134.7 (a) Compute the following liquidity, solvency and coverage ratios for both years. Round all your answers to two decimal places. 2018 current ratio = 2017 current ratio = 2018 quick ratio = 2017 quick ratio = 2018 liabilities-to-equity = 2017 liabilities-to-equity = 2018 total debt-to-equity = 2017 total debt-to-equity = 2018 times interest earned = 2017 times interest earned 2018 cash from operations to total debt = 2017 cash from operations to total debt = 2018 free operating cash flow to total debt = 2017 free operating cash flow to total debt = (b) Which of the following best describes the company's credit risk? OBoth the quick and current ratios for 2018 decreased in the past year but are higher than 1.0. Its interest coverage ratio remains high, indicating it has it may have difficulty making interest payments on its debt. OBoth the quick and current ratios for 2018 increased in the past year and are higher than 1.0, implying Starbucks is relatively liquid. Starbucks' interest coverage ratio decreased but remains high, indicating it has the ability to cover interest payments on its debt. OBoth the quick and current ratios for 2018 decreased in the past year indicating Starbucks may have may have difficulty converting assets to cash. However, its interest coverage ratio remains high, indicating it has the ability to cover interest payments on its debt. OBoth the quick and current ratios for 2018 increased in the past year and are higher than 1.0, implying Strabucks is relatively liquid. Starbucks' interest coverage ratio is weak, indicating it may have difficulty making interest payments on its debt.

Answer rating: 100% (QA)

Part a Part b option b Both the quick and current rat... View the full answer