1. In 2022, Caterpillar (CAT) reports Net income of $6,400, Cash from operations (CFO) of $5,400. Caterpillar had $82,500 average total assets. (note: all amounts in $M). What can you conclude from this information?

A) Caterpillar repurchased $1,000 of common equity during the year.

B) Caterpillar has low quality of earnings in 2022, because the TATA ratio is positive.

C) Caterpillar has interest coverage ratio less than 1, meaning it is not generating enough earnings to pay interest expense.

2. When analyzing Lululemon (LULU), you compute the following ratios:

2022 Current Ratio = 1.2

2022 Quick Ratio = 0.5

2021 Days inventory = 68 days

2022 Days inventory = 64 days

Which is the best interpretation of this data?

A) The decreasing days in inventory suggests LULU is having problems moving inventory, and obsolescence is likely to be a concern.

B) Lululemon has less current assets than they do current liabilities, which is a red flag and indicates liquidity concerns.

C) LULU has less cash, marketable securities, and accounts receivable than they do current liabilities. Their liquidity will depend on the ability to turn over inventory, but the decreasing days in inventory do not indicate this is a concern.

3. Gleason Corp (GLEE) shows the following patterns in their most recent three years of financial statements.

202020212022
Sales growth (%)86%45%26%
Cash From Operations($9,830)($1,233)$1,454
Cash From Investing($12,349)($15,349)($19,349)
Cash From Financing$23,023$21,919$12,456
Based on these patterns, at what point in their life cycle would you characterize GLEE corporation at the end of 2022?

Answer rating: 100% (QA)

1 From the information provided we can conclude that option C Caterpillar has an interest coverage r... View the full answer