discuss the meaning of liquidity and solvency as it applies to a company's liquidity and credit-risk. It is often thought that the higher the company's current ratio and/or the lower the debt-to-asset ratio, the better the company's financial condition. Do you agree with these statements? Select from industry examples noted below to support/explain your point of view Industry Company Current Ratio Debt-Asset Ratio Oil & Gas Industry Average 2020 1.08 .52   Exxon .80 .51   Marathon Oil 1.32 .41   BP America 11.01 .66

The AFN equation provides useful insights into the forecasting process, but this equation assumes that all of the firm's key ratios remain constant, which is not likely to hold true. Consequently, it is useful to forecast the firm's financial statements. The firm begins with forecasting its (income statement, cashflow statement and cash budget)?  which then feeds into the firm's balance sheet. Management looks at operating ratios and their relationship with industry and benchmark averages. The forecasted income statement begins with the prior year's income statement and is adjusted for the sales growth forecast. Some inputs for the income statement are not under the firm's control - for example, tax and interest rates. The forecasted balance sheet is calculated from asset ratios that management has reviewed and changed based on industry and benchmark averages. An Excel spreadsheet is used for this analysis because changes in assumptions, financing, and ratios can be made to the…

Liquidity ratios measure the ability of the firm to meet debt obligations that come due beyond one year. True or False

The database summarizes financial information for 32 companies and their perceived risk of default. Convert these data into an Excel table. Use​ table-based calculations to find the average debt and average equity for companies with a risk of​ default, and also for those without a risk of default. Does there appear to be a difference between companies with and without a risk of​ default?       Company Category Credit Score Debt Equity Default Assessment1 Service 604 10,644,614 3,975,798 Yes2 Manufacturing 714 4,787,980 2,120,721 No3 Manufacturing 732 179,433 1,785,756 No4 Manufacturing 792 8,464,689 11,939,364 No5 Service 623 3,273,638 779,720 Yes6 Manufacturing 702 13,367,369 4,392,888 Yes7 Service 764 4,117,031 6,145,790 No8 Manufacturing 690 7,356,986 5,853,539 No9 Service 802 7,283,191 11,667,373 No10 Service 610 14,899,343 3,939,546 Yes11 Manufacturing 590 8,731,914 19,948,036 No12 Manufacturing 824 577,722 31,488,366 No13 Service 762 8,637,970 4,570,078 No14 Manufacturing 601…

Long-term solvency refers to a company’s ability to pay its long-term obligations. Financing ratios provideinvestors and creditors with an indication of this element of risk.Required:1. Calculate the debt to equity ratio for AGF for 2018. The average ratio for the stocks listed on the New YorkStock Exchange in a comparable time period was 1.0. What information does your calculation provide aninvestor?2. Is AGF experiencing favorable or unfavorable financial leverage?3. Calculate AGF’s times interest earned ratio for 2018. The coverage for the stocks listed on the New YorkStock Exchange in a comparable time period was 5.1. What does your calculation indicate about AGF’s risk?

Which of the following financial measures are used to determine a company's credit rating?   a)A company's current ratio, quick ratio, inventory turnover ratio, and default risk ratio b) Its ratio of annual interest payments to net profits, current ratio, working capital ratio, debt-equity ratio, and percentage return on capital employed  c) Its loans outstanding as a percentage of total revenues, default risk ratio, inventory turnover ratio, and long-term debt-to-equity ratio d) Its total debt-equity ratio, current ratio, working capital ratio, and ratio of prior-year cash flow from operations to prior-year interest payments e) The percentage by which prior-year cash flow from operations covers a company's prior-year interest payments, the company's debt-asset ratio, its dividend payout ratio, and its default risk ratio

1. What are some of the tests of a sound or healthy long-term financial position? 2. Give some indications of managerial efficiency in the use of company resources. 3. What are the most commonly used techniques in the analysis and interpretation of financial statements? 4. What are the steps involved in using trend percentages in financial analysis? 5. Distinguish between horizontal and vertical analysis of financial statement data 6. What is the basic objective in looking at trends in financial ratios and other data? 7. Define trendpercentages 8. Discuss the steps in analyzing financial statements using trend percentages. 9. In financial statement analysis, what is the basic objective of observing trends in data and ratios? Suggest some other standards of comparison. 10. Distinguish between trend percentages and component percentages. 11. Which would be better suited for analyzing the change in sales over a term of several years? 12. Nets sales of the Premiere General Store have been…

Assuming Target’s industry had an average current ratio of 1.0 and an average debtto equity ratio of 2.5, comment on Target’s liquidity and long-term solvency.

You have the following initial information on Financeur Co. on which to base your calculationsand discussion for questions 1) and 2): (Answers in Excel if possible) • Current long-term and target debt-equity ratio (D:E) = 1:3• Corporate tax rate (TC) = 30%• Expected Inflation = 1.55%• Equity beta (E) = 1.6345• Debt beta (D) = 0.15• Expected market premium (rM – rF) = 6.00%• Risk-free rate (rF) =2%1) The CEO of Financeur Co., for which you are CFO, has requested that you evaluate apotential investment in a new project. The proposed project requires an initial outlay of$7.26 billion. Once completed (1 year from initial outlay) it will provide a real net cashflow of $555 million in perpetuity following its completion. It has the same business riskas Financeur Co.’s existing activities and will be funded using the firm’s current target D:Eratio.a) What is the nominal weighted-average cost of capital (WACC) for this project?b) As CFO, do you recommend investment in this project? Justify…