E4-28

A. ROE= Net Income / Average Stockholders Equity 6,976/(42,762+36,752/2)=0.1755 RNOA=NOPAT/NOA 6,364/31,443=0.202 B. NOPM=NOPAT/Revenue 6,364/38,334= 0.166 NOAT= Revenue/NOA 38,334/(31,443+30,955/2)= 1.229 Based on Macys NOAT we can observe that their operating assets are effectively producing revenue. Bases NOPM we can determine that they are producing operating profit that are similar to other companies in their industry. C. RNOA/ROE= 0.202/0.1755= 1.1509 E4-32 A. Current Ratio =Current Assets /Current Liabilities 2005: 19,320/26,700= 0.723 2006: 22,538/32,280= 0.698 2007: 18,698/24,741= 0.755 I believe that this company is not sufficiently liquid because their liabilities that will come due with in the year are greater than assets that they will have available with in the year. It would be useful to see what amount of the current assets relates to cash and what amount of the current liabilities are accounts payable because this company looks like they may not be able to pay their bills in the future. B. Times Interests Earned = EBIT/Interest Expense 2005: 8,448/2,129=3.968 2006:8,154/2,349=3.471 2007: 9,492/1,829=5.189 Liabilities to Equity Ratio = Total Liabilities /Stockholders Equity 2005: 102,017/66,113= 1.543 2006: 111,932/76,872=1.45 2007: 104,090/82,869= 1.25 C. Based their ratio that I computed Verizon is not liquid and they are heavily debt funded. E4-33 A. Industry Segment: 25,262/1,993= 12.675 Financial Segment: 13,764/22,731=0.6055 Consolidated: 26,598/23,787=1.118 Industry Segment: 92,724/115,559=0.80 Financial Segment: 586,962/57,676= 10.17 Consolidated: 671,774/115,559= 5.81

B. The company as a whole is solvent because their income is greater than their interest expense. The industry segment does not rely heavily on debt financing; the financial segment is heavily financed. This would be inline with my expectation since the financial segment deals with loans. C. If we where only to look at the consolidated statements, we would see that the company is heavily debt financed. By examining the business segments we can see that this due to the activity of the financial segment.

P4-39 A. NOPAT=NOPBT-Tax Operating Profit 2008 4,625-1,776=2,849 2007 4,497-1,710=2,787 B. NOA =Operating Assets Operating Liabilities 2008 44,560-12,163=32,397 2007 37,349-11,679= 25,670 C. NOPM=NOPAT/Revenue 2008 2,849/61,471= 0.046 2007 2,787/50,878=0,048 NOAT= Revenue/ Average NOA 2008 61,471/32,397=1.90 2007 57,878/25,670=2.25 Targets NOPM was constant or similar for both 2008 and 2007. The NOAT decreased from 2007 to 2008 because revenue was relatively consistent but there was a significant increase in NOA in 2008. D. NNO 2008 17,090 2007 10,037 NOA = NNO +Stockholder Equity 2008 32,397=17,090+15,307 2007 25,670= 10,037+15,633 E. ROE=Net Income /Average Stockholders Equity 2008 2,849/(15,307+15,633/2)= .184 2007 2,787/(15,633+14,205/2)= .187 F. 2008 =17,090/ (15,307+15,633/2)= 1.10 2007 = 10,037/(15,633+14,205/2)= . 67 G. ROE decreased slightly from 2007 to 2008 RNOA decreased significantly (from 10.9% to 8.8 %). P4-45 A. Current Ratio = Current Assets/Current Liabilities 2007 13,041/6,179=2.11 2006 11,712/6,942=1.69 Quick Ratio = Current Assets Inventory /Current Liabilities 2007 10,950/6,179=1.77

2006 9,809/6,942=1.41 Amgens current and quick ratio increased from 2006 to 2007 because they had more current assets and less current liabilities in 2007. B. Time interests earned = EBIT/Interest Expense 2007 3,961/328=12.08 2006 4020/129=31.16 Liabilities to Equity Ratio = Total Liabilities /Total Equity 2007 16,770/17,860= .94 2006 14,824/18,964=. 78 Time interest earned decreased and the liabilities to equity ratio increased from 2006 to 2007 because the company increased their debt borrowing which increased their interest expense. C. Amgen s liquidity from 2006 to 2007 remains strong as they have sufficient current assets to pay their current liabilities. Their solvency decreased from 2006 to 2007 however they should have sufficient cash to meet their obligations. P4-48 A. ROE=(Net Income/ Sales) *(Sales /Average Assets) *(Average Assets/Average Equity) Profit Margin: 2,849/61,471=. 046 Assets Turnover: 61,471/ (44,560+37,349/2)=1.50 Finical Leverage: (44,560+37,349/2)/(15,307+15,633/2)= 2.65 B. ROE =PM*AT*FL=.183 C. ROA=(Net Income +Interest Expense *1-Taxe Rate)/Average Assets 2,849+647*.61/(44,560+37,349/2)= .079 D. Target is a retailer and based on exhibit 4.4 retailers in industry have NOAT of 2.5 and NOPM of 6 %. Targets assets turnover is below the industry average and their profit margin is also below the industry average.