Exercise 12-10 Information for two companies in the same industry, Patton Corpor
ID: 2450006 • Letter: E
Question
Exercise 12-10
Information for two companies in the same industry, Patton Corporation and Sager Corporation, is presented here.
Patton
Corporation
Sager
Corporation
Net cash provided by operating activities $ 79,480 $100,170
Average current liabilities 49,480 100,650
Average total liabilities 180,520 250,470
Net income 199,450 199,450
Capital expenditures 40,030 69,990
Dividends paid 5,830 10,670
Using the cash-based measures presented compute the liquidity and solvency of the two companies. (Round ratios to 2 decimal places, e.g. 2.56.)
Patton
Corporation
Sager
Corporation
Patton
Corporation
Sager
Corporation
$
$
Explanation / Answer
patton Corporation Sager Corporation
Liquidity - Current cash debt coverage
( Net cash prvoided by operating activities ) $79480/ $49480 $100170 / $100650
Average current liabilities
1.61 0.99
Solvency - Cash debt coverage $79480 / $180520 $100170 / $250470
( operating cash flow ) 0.44 0.39
Total liabilities
Free cash flow $79480 - $40030 - $5830 $100170- $69990-$10670 = $33620 =$19510
Note: free cash flow = net cash flow from operating activities - capital expenditure - dividend
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