Calculating Ratios and Estimating Credit Rating The following data are from Kell

Question

Calculating Ratios and Estimating Credit Rating The following data are from Kellogg's 10-K report dated January 2, 2016 (S millions). E7-42. LOS Kello 553 Amortization expense. Depreciation expense. . 526 a. Use the data above to calculate the following ratios: EBITA/Average assets, EBITA Margin, EBITA Interest expense, Debt/EBITDA, CAPEX/Depreciation Expense. Definitions for these ratios are in Exhibit 7.6 b. Refer to Exhibit 7.6 and the ratios you calculated in part a. Estimate the credit rating that Moody's might assign to Under Armour.

Explanation / Answer

Earnings from continuing operations $614 Tax expense 159 Interest expense 227 EBIT $1,000 Amortization expense 8 EBITA $1,008 Depreciation expense 526 EBITDA $1,534 Ratio Moody's rating EBITA/Avg. assets = $1008/15209 6.6% B EBITA margin = $1008/$13525 7.5% C EBITA/Int. expense = $1008/ 227 4.4 Baa Debt/EBITDA = 7759/1534 5.1 B CAPEX/Dep. expense = 553/526 1.1 Baa or Ba

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