Selected risk ratios are presented for 2011 and 2010 for Techtron Company. Also, refer to the financial statement data for the company. 2011 2010 Revenues to Cash Ratio Days Revenues Held in Cash Current Ratio Quick Ratio Operating Cash Flow to Average Current Liabilities Ratio 6.8 7.7 54 47 1.5 1.5 1.1 1.1 47.3% 55.7% Days Accounts Receivable Days Inventory Days Accounts Payable Net Days Working Capital Liabilities to Assets Ratio Liabilities to Shareholders' Equity Ratio Long-Term Debt to Long-Term Capital Ratio Long-Term Debt to Shareholders' Equity Ratio Operating Cash Flow to Total Liabilities Ratio Interest Coverage Ratio 68 73 51 68 47 49 72 91 0.559 1.266 0.621 1.639 0.330 0.418 0.492 0.243 0.720 0.242 5.6 2.3 Financial Statements INCOME STATEMENT (in millions) Fiscal year end Sales Cost of Goods Sold 2012 2011 $2,500 (1,252) $3,139 (1,288) 2010 $2,816 (1,099) Selling, General & Admin. Exp. Advertising Research and Development Royalty Expense Other Selling and Administrative Interest expense Income tax expense Net income (387) (157) (223) (385) (32) (64) 196 (364) (143) (248) (799) (53) (69) $ 175 (297) (154) (296) (788) (78) (29) $ 75 Balance Sheet Fiscal year end ASSETS (in millions) Cash Accounts Receivable Inventories 2012 2011 2010 2009 $ 625 579 195 219 $1,618 207 S 496 55 190 Prepayments Total current assets Property, plant & equipment Other Assets Total assets $421 607 169 212 $1,409 200 $233 572 217 346 $1,368 236 1,765 $3.369 191 $1,432 213 1416 $3.241 1.554 $3.163 1.498 $3.143 LIABILITIES Accounts payable Short-term borrowing Other current liabilities $ 168 342 $ 159 $ 166 $ 123 24 749 223 36 599 584 578 $ 939 687 141 $1,767 $ 758 1,166 92 $2,016 Total current liabilities Long-term debt Other noncurrent liabilities Total liabilities $1,094 303 149 $1,546 $ 967 857 128 $1.952 Common stock Additional Paid-in Capital Retained earnings Accumulated Other Comprehensive Income Treasury Stock Total Shareholders' equity Total Liabilities & Shareholders' Equity $ 105 381 1,776 82 $ 105 398 1,558 30 (695) $1.396 $3.163 $ 105 458 1,430 (47) (755) $1.191 $3.143 $ 105 455 1,622 (68) (761) $1,353 $3.369 (649) $1.695 $3.241 STATEMENT OF CASH FLOWS (in millions) Operations Net Income 2012 2011 2010 $ 196 146 28 (26) $ 75 184 $ 175 164 (52) 21 Depreciation & Amortization (Increase) Decrease Accounts Receivables (Increase) Decrease Inventories (Increase) Decrease Prepayments (Decrease) Increase Accounts Payable & Other Current Liabilities Net Addbacks and Subtractions from operations Cash flows from operations Investing Property Plant and Equipment acquired Other Investing Transactions Cash Flows from Investing 17 27 (21) 155 (90) (147) $ 195 23 112 $451 221 $480 ($79) (6) (S85) ($63) (2) ($65) ($59) (3) ($62) Financing Increase in Common Stock 0. (187) 309 Increase (Decrease) in Short-term Borrowing Increase (Decrease) in Long-term Borrowing Acquisition of Common Stock Dividends Other Financing Transactions Cash flow from Financing Change in Cash Cash - Beginning of Year Cash - End of Year (318) (384) (46) (37) 879 $94 $204 199 (170) (21) 243 ($311) $75 (6) (21) (250) ($151 $263 233 $ 496 421 $ 625 496 $421 Required: Use the spreadsheet below to provide your calculations and answers on the appropriate columns a. Calculate the amounts of these ratios for 2012. b. Assess the changes in the short-term liquidity risk of Techtron between 2010 and 2012 and the level of that risk at the end of 2012. c. Assess the changes in the long-term solvency risk of Techtron between 2010 and 2012 and the level of that risk at the end of 2012.