AB.D.Two companies competing in the same industry are being evaluated by a bank that can lend money to2 only one of them. Summary information from the financial statements of the two companies follows:34RowlandPierceRowlandPierceCompany6 Data from the current year-end balance sheets:CompanyCompanyData from the current year's income statements:Company7.8 Assets9 Cash10 Accounts Rec, net1 Current note receivable2 Mdse Inventory3 Prepaid expenses4 Plant assets, net5 Total assets19,50034,000Sales770,000880.20037,40057,400Cost of Goods sold585,100632.5009,1007,200Interest ExpenseIncome tax expense7,90013,00084,440132,50014,80024,3005,0006,950Net income162,200210,400290,000304,400Common shares outstanding36,00041.200445,440542,450Beginning of year balance sheet data:Accounts Receivable, net- Liabilities and Equity3 Current liabilitiesO LT Notes PayableO Common stock, $5 par valueRetained EamingsTotal liabilities and equity29,80054.20061,34093,300Current Notes Receivable80,800101.000Mdse InventoryPlant assets, net55,600107,400180,000206,000287,100178.900123,300142,150Total Assets382.50G-398.000445,440542,450Common Stock180,000206,000Retained Earmings98,30093,600Required:1 For both companies compute:d. Net Assetse. Debt ratiof. Times Interest EarnedIdentify the company you consider to be the better credit risk (evaluate liquidity and solvency) and explain why.

Liquidity ratios are financial ratios that measure the ability of a firm to pay back its short-term…

98,300 Required: 1 For both companies compute: d. Net Assets e. Debt ratio f. Times Interest Eamed Identify the company vou consider to be the better credit risk (evaluate liquidity and solvency) and explain why.

98,300 Required: 1 For both companies compute: d. Net Assets e. Debt ratio f. Times Interest Eamed Identify the company vou consider to be the better credit risk (evaluate liquidity and solvency) and explain why.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter7: Receivables And Investments

Section: Chapter Questions

Problem 7.3DC

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Selected information for a recent year follows for Bank of Montreal and Scotiabank (in millions): Bank of Montreal Scotiabank Profit $3,990 $8,243 Cash provided (used) by operating activities 2,908 16,584 Cash provided (used) by investing activities (3,155 ) (12,540 ) Cash provided (used) by financing activities 1,996 (2,932 ) Calculate the increase or decrease in cash for each company. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Enter your answers in millions.) Bank of Montreal Scotiabank $ $ eTextbook and Media Calculate the free cash flow for each company. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Enter your answers in millions.) Bank of…