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Alternative Example 2.5 • Problem – Assess Rylan’s ability to meet its interest obligations by calculating interest coverage ratios using both EBIT and EBITDA. Income Statement 2012 2011 Revenues $500,000,000 $450,000,000 Less: Cost of Goods Sold $225,000,000 $200,000,000 Gross Profit $275,000,000 $250,000,000 Less: Operating Expenses $150,000,000 $140,000,000 EBITDA $125,000,000 $110,000,000 Less: Depreciation $25,000,000 $22,500,000 EBIT $100,000,000 $87,500,000 Less: Interest Expense $10,000,000 $9,000,000 EBT $90,000,000 $78,500,000 Less: Taxes (40%) $36,000,000 $31,400,000 Net Income $54,000,000 $47,100,000 Copyright ©2014 Pearson Education, Inc. All rights reserved. 2-64
Alternative Example 2.5 (cont'd) • Solution – EBIT/Interest • 2012: $100,000,000 / $10,000,000 = 10.0 • 2011: $87,500,000 / $9,000,000 = 9.72 – EBITDA/Interest • 2012: $125,000,000 / $10,000,000 = 12.5 • 2011: $110,000,000 / $9,000,000 = 12.2 – Using either measure, Rylan’s ability to meet its is very good and improving. Copyright ©2014 Pearson Education, Inc. All rights reserved. 2-65
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Chapter 2 Introduction to Financial
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Learning Objectives 1. List the fou
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Learning Objectives 4. Discuss the
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Learning Objectives 8. Explain the
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2.1 Firms’ Disclosure of Financia
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2.2 Balance Sheet • A snapshot in
Page 13 and 14: 2.2 Balance Sheet (cont'd) • Asse
Page 15 and 16: Table 2.1 Global Conglomerate Corpo
Page 17 and 18: 2.2 Balance Sheet (cont'd) • Net
Page 19 and 20: Table 2.1 (cont'd) Global Conglomer
Page 21 and 22: 2.2 Balance Sheet (cont'd) • Mark
Page 23 and 24: 2.2 Balance Sheet (cont'd) • Ente
Page 25 and 26: Textbook Example 2.1 (cont'd) Copyr
Page 27 and 28: Alternative Example 2.1 • Solutio
Page 29 and 30: 2.3 Income Statement (cont'd) • G
Page 31 and 32: 2.3 Income Statement (cont'd) • E
Page 35 and 36: 2.4 Statement of Cash Flows • Net
Page 37 and 38: 2.4 Statement of Cash Flows (cont'd
Page 43 and 44: 2.5 Other Financial Statement Infor
Page 47 and 48: Alternative Example 2.3 • Solutio
Page 49 and 50: 2.6 Financial Statement Analysis
Page 51 and 52: 2.6 Financial Statement Analysis (c
Page 57 and 58: Alternative Example 2.4 (cont'd)
Page 63: Textbook Example 2.5 (cont'd) Copyr
Page 69 and 70: Textbook Example 2.6 Copyright ©20
Page 71 and 72: Alternative Example 2.6 Problem: Co
Page 73 and 74: Solution: Yahoo: Alternative Exampl
Page 75 and 76: Solution: Google: Alternative Examp
Page 77 and 78: Alternative Example 2.6 (cont’d)
Page 81 and 82: Textbook Example 2.7 (cont’d) Cop
Page 89 and 90: Alternative Example 2.8 (cont'd)
Page 93 and 94: Discussion of Key Topic • If a fi
Page 95 and 96: Table 2.4 A Summary of Key Financia
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