Sun Microsystems, Inc., develops, manufactures, and sells computers for network systems. Exhibit 5.20 presents selected financial data
Question:
REQUIRED
a. Compute the value of each of the following risk ratios.
(1) Current ratio (at the end of Year 1Year 5)
(2) Operating cash flow to current liabilities ratio (for Year 2Year 5)
(3) Liabilities to assets ratio (at the end of Year 1Year 5)
(4) Long-term debt to long-term capital ratio (at the end of Year 1Year 5)
(5) Operating cash flow to total liabilities ratio (for Year 2Year 5)
(6) Interest coverage ratio (for Year 1Year 5)
b. Compute the value of Altmans Z-score for Sun Microsystems for each year from Year 1 to Year 5.
c. Using the analyses in Requirements a and b, discuss the most important factors that signal the likelihood of bankruptcy of Sun Microsystems in Year 6.
Step by Step Answer:
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw