Margaret OFlaherty, a portfolio manager for MCF Investments, is considering investing in Alpine Chemical 7% bonds, which mature in 10 years. She asks you to analyse the company to determine the riskiness of the bonds.

TABLE 1 Alpine Chemical Company

	2012	2013	2014		2015		2016			2017
EBIT/Interest expense	4.95	3.46	4.96		4.79		4.70			?
Long-term debt/Total capitalization	44%	28%	34%		34%		34%			?
Funds from operations/Total debt	54%	84%	93%		56%		51%			?
Operating income/Sales	13%	13%	13%		14%		12%			?
TABLE 2 Industry Data Three-Year Medians (20152017) by Credit-Rating Category
				Aaa		Aa		A	Bbb		Bb	B
EBIT/Interest expense				11.0		9.5		4.5	3.0		2.0	1.0
Long-term debt/Total capitalization				13.0		16.5		29.5	39.0		45.5	63.5
Funds from operations/Total debt				83.0		74.0		45.5	31.5		18.5	8.0
Operating income/Sales				21.5		16.0		15.0	12.0		11.0	9.0

Are the operating profits (EBITD) of Alpine keeping pace with sales? Comment on the growth (increase/decrease) of sales and operating profits in 2017 in respect to the prior years. Show all your workings, including percentages (workings to be tabulated).

Alpine Chemical Company Financial Statements Years Ended December 31, ($ in millions) 2012 2013 2014 2015 2016 2017 Assets Cash $ 190 $ 55 $ 0 $ 157 $ 249 $ 0 Accounts receivable 1,637 2,087 1,394 2,143 3,493 3,451 Inventories 2,021 945 1,258 1,293 1,322 1,643 Other current assets 17 27 _ 55 393 33 171 Current assets 3,865 3,114 2,707 3,986 5,097 5,265 Gross fixed assets 4,650 5,038 5,619 5,757 6,181 7,187 943 Less: Accumulated depreciation 2,177 2,543 2,841 3,138 3,465 3,893 Net fixed assets 2,473 2,495 2,778 2,619 2,716 3,294 $ 6,338 $ 5,609 $ 5,485 $ 6,605 $ 7,813 $ 8,559 Total assets Liabilities and net worth 525 Notes payable Accounts payable $ 750 638 $0 681 $ 1,300 $ 1,750 $ 1,900 338 743978 673 Accrued liabilities Current liabilities Long-term debt 303 1.501 1,985 172 483 172 1.560 1,044 _761 359 359 1,040 1,401 359 359 ,997 1,457 1 483 2,976 1,542 761 3,639 1,491 352 3,838 Deferred tax credits Total liabilities Common stock Capital surplus 50 347 363 336 345 354 2,951 2,804 3,790 4,863 5,484 50 100 100 100 100 100 000 0 100 Retained earnings 2,350 2,500 2,508 2,658 2,581 2,681 2,715 2,815 2,850 2,950 2,975 3,075 Net worth Total liabilities and net worth $ 6,338 $ 5,609 $ 5,485 $ 6,605 $ 7,813 $ 8,559 Income statement Net sales Cost of goods sold Gross profit Operating expense Operating income Interest expense Depreciation expense Profit before tax Income taxes Net income 2012 $ 14,100 10,200 3,900 2,065 1,835 275 475 1,085 193 892 2013 $15,508 11,220 4,288 2,203 2,085 465 477 1,143 115 $ 1,028 2014 $13,875 9,366 4,509 2,665 1,844 275 479 1,090 265 $ 825 2015 $14,750 10,059 4,691 2,685 2,006 319 478 1,209 _ 145 $ 1,064 2016 $19,133 13,400 5,733 3,472 2,261 2017 $19,460 13,117 6,343 3,885 2,458 318 511 1,629 150 $ 1,479 376 495 1,390 192 $ 1,198