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Margaret O'Flaherty, 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. Alpine Chemical Company Financial Statements Years Ended December 31, (Sin millions) 2012 2013 2014 2015 2016 2017 Assets Cash $ 190 S 55 $ 0 $ 157 $ 2495 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 Less: Accumulated depreciation Net fixed assets 2.177 2.543 2.841 3.138 3.465 3.893 2.473 _ 2.495 2.778 2.619 2.716 3.294 $ 6,338 S 5,609 S 5,485 $ 6,605 S 7,813 S 8.559 Total assets Liabilities and net worth $ Notes payable Accounts payable 525 673 $ 750 638 SO $ 1,300 $ 1,750 $ 1.900 681 338 743 9 78 - - Acerued liabilities Current liabilities Long-term debt 303 1.501 1.985 172 1 560 1,044 359 1040 1.401 359 1.997 1.457 - 483 2.976 1.542 761 3.639 1.491 Deferred tax credits Total liabilities Common stock Capital surplus 352 3,838 50 347 363 336 345 _ 354 2.951 2.804 3.790 4,863 5.484 50 100 100 100 100 000 0 100 100 Retained earnings Net worth 2.350 _ 2.508_2,581 2,715 2.850_2.975 2,500 2.658 2,681 2.815 2.950 3,075 $ 6,338 $ 5,609 S 5,485 6.605 S 7.813 $ 8.559 Total liabilities and net worth 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 2013 $15,508 11.220 4.288 2.203 2.085 465 2014 2015 S13,875 S14,750 9,366 10.059 4,509 4.691 2.665 2.685 1.8442 .006 275 319 2016 $19.133 13.400 5,733 3.472 2.261 2017 S19,460 13.117 6,343 3.885 2.458 318 511 1.629 150 $ 1.479 376 1.143 UIS 1.028 5 1.090 265 8255 1.209 145 1.064 495 1.390 - 192 $ 1.198 $ 892 $ 4. 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). 5. Compute and comment on the days receivables outstanding using year-end receivables for each year in the schedule. Use additional ratios to comment on the accounts receivables of Alpine (for example, comparing sales growth and accounts receivable growth in 2017 relative to the earlier years). 6. Show the cash flow from operating activities of Alpine Chemical Company in 2017 (for this part of the requirement, assume all net sales are credit sales: accrued liabilities include operating expense, interest expense and income taxes, and no prepaid expenses). Taking into account your computations and comments in parts (iv), (v) and (vi), comment on the overall liquidity and cash flow position of Alpine Chemical Company in 2017. 7. Identify the accounts that most likely would require further disclosure in the notes to the financial statements in an annual report, and describe what information would have to be disclosed in those notes by Alpine Chemical Company before the statements can be included as part of the annual report for presentation to its stockholders, and that may assist prospective investors in decision-making

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