Can someone teach me how to answer all the questions above? C2-2 TJX, Inc., and

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Can someone teach me how to answer all the questions above?

C2-2 TJX, Inc., and OshKosh B'Gosh, Inc. Refer to the TJX Companies, Inc., balance sheets, presented on page 35, and the OshKosh B'Gosh, Inc., financial statements below. TIX Companies operates the TJ Maxx chain of 0shKosh B'Gosh, Inc. and Subsidiaries Consolidated Balance Sheets (amounts in thousands, except per share amounts) January 2, 1999 December 31 1997 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, less allowances $14,308 2,500 $ 13,779 8,700 24,008 65,584 862 16.700 123,962 32,380 1,900 1,326 $162,568 23,278 68,226 1,265 15.800 $131,048 32,955 5,500 5,285 $174,788 of $4,240 in 1998 and $4,225 in 1997 Prepaid expenses and other current assets Deferred income taxes Total current assets Property, plant, and equipment, net Deferred income taxes Other assets Total assets LIABILITIES AND SHAREHOLDERS'EQUITY Current liabilities: S 7,638 39,448 S47,086 12,465 59,551 10,273 38,013 s 48,286 13,345 61,631 Accounts payable Accrued liabilities Total current liabilities Employee benefit plan liabilities Total liabilities ,55 Shareholders equity Preferred stock, par value $0.01 per share: Authorized 1,000,000 shares issued and outstanding-None Common stock, par value $0.01 per share Class A, authorized-30,000,000 shares; Issued and outstanding-15,668,859 shares 157 173 in 1998, 17,345,806 shares in 1997 Class B, authorized-3,750,000 shares; Issued and outstanding 2,260,522 shares in 1998, 2,364,564 shares in 1997 Retained carnings Total shareholders'equity 23 102,837 $103.017 24 112,960 $113,157 Total liabilities and shareholders See notes to consolidated financial statements. equity $162,568

Explanation / Answer

1) TJX has debt to equity ratio (long term debt / shareholders fund) of 5.53 times, which means company has enough own funds and is not dependent on outside funds for running the business.

2) As debt equity ratio of Oshkosh is o,(nill long term loan) long term creditor prefer lower debt equity ratio , hence oshkosh company is less riskier

3) Cash equivalents means items which can be easily coverted into cash like shor term investemed which can be sold within 90 days

4) Yes TJX could immediatley pay off its debt as it has enough bank balance greater than its long term debt .if it does show bank balance would be decreased and long term debt would also decrease by the same amount. Due to ths current ratio will become lower becasue short term funds has been use to pay off long term debt. Current assets will decrese howver no decrese in current liablities, and current ratio will automatically decrease.

5) Cash wil change by (+300000-275000) ie incrase by $ 25000 : new stores as land and building will be added to FA at $275000 : similarly shares amount will increase by $300000

6) Debt will increse by $300000 out of which $60000 will be short term impacting current liablities and $240000 wii be long term debt, Cash wil change by (+300000-275000) ie incrase by $ 25000 : new stores as land and building will be added to FA at $275000

7) second method will increase the credit risk as the company has to pay interest on the borrowed amount and also debt equity ratio will also increase

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