Purchase Solution

Measures of solvency and credit risk

Not what you're looking for?

Ask Custom Question

Shown below are selected items appearing in a recent balance sheet of Kellogs products. (Dollar amounts are in the thousands)

Cash and cash equivalents...$420
Investments in marketable securities...100
Receivables...1,200
Inventories...900
Prepaid expense and other current assets...250
Plant and equipment...3,100
Accounts payable...1,400
Bank loans payable within one year...100
Income taxes payable...100
Retained earnings...1,500

A) Compute the following:

1)Total quick assets$___________
2)Total current assets$_________
3)Total current liabilities$_________
4)Quick ratio__________to 1
5)Current ratio ________to 1

B) Reasearch indicates an industry average quick ratio is 1.3 to 1, and a current ratio of 2.3 to 1. Based upon this information, does Kellog products appear more or less solvent than the average company in its industry? Explain briefly.

Purchase this Solution
Solution Summary

The expert computes Total quick assets, Total current assets, Total current liabilities, Quick ratio, Current ratio

Solution Preview

See attached file

Measures of solvency and credit risk
Shown below are selected items appearing in a recent balance sheet of Kellogs products. (Dollar amounts are in the thousands)

Cash and cash equivalents...$420
Investments in ...

Purchase this Solution
Free BrainMass Quizzes
Basics of corporate finance

These questions will test you on your knowledge of finance.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Introduction to Finance

This quiz test introductory finance topics.

View More Free Quizzes
Related BrainMass Solutions

  • Credit worthiness of the company

    Solvency ratios measures the long term solvency of the organization.

  • Risk Measurement Tool

    605972 Risk Measurement Tool comment on the first risk measurement tool you would use and why for any two of the following: * Short term liquidity risk * Long term solvency risk * Credit risk * Bankruptcy risk. Solution attached.

  • Credit Standing and Target Ranges

    This measures the long term solvency of the organization. Lower debt equity ratio indicates lower financial risk. Bank will prefer the organization to have lower debt equity ratio. I will also use debt ratio which is calculated by Debt/Assets.

  • Difference in solvency and liquidity; explain 4 ratios

    Solvency measures are concerned with the long term ability to meet obligations.

  • Credit risk analysis

    The effective management of credit risk is a critical component of a comprehensive approach to risk management and essential to the long-term success of any financial institution.

  • Choosing Financial Targets: Bixton Company's new chief financial officier is evaluating Bixton's capital structure.

    This measures the long term solvency of the organization. Lower debt equity ratio indicates lower financial risk. Bank will prefer the organization to have lower debt equity ratio. I will also use debt ratio which is calculated by Debt/Assets.

  • PepsiCo Inc. Coca-Cola Company annual report analysis

    SOLVENCY Measures of solvency look to review whether , in the longer run, there are sufficient profits to afford the debt (times interest earned) and sufficient owner's capital to reduce the credit risk for the lenders (debt to equity ratio).

  • Financial Statement Analysis

    Market equity beta measures the covariability of a firm's returns with the returns of which of the following? a. All industry competitors in the market b. Risk free securities c. All securities in the market d.

  • On Your Mark: Analysis of the Financial Condition

    Case of OnyourMark Risk factors 1) Solvency Following ratios will be seen: Debt equity ratio This measures the long term solvency of the organization. Lower debt equity ratio indicates lower financial risk.

View More Related Solutions