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Compute Ratios from Statement of Cash Flow Information Use the following information, taken from each of...

Compute Ratios from Statement of Cash Flow Information
Use the following information, taken from each of the company's 2018 financial statements to complete the requirements.

Cash from Current

Company

 Operations Liabilities CAPEX
Arconic Inc. $217 $3,520 $768
Carmax Inc. 163 1,312 305
Flowserve Corp. 191 1,081 84
Fluor Corp. 162 3,553 211



a. Compute the operating cash flow to current liabilities ratio for each company.
b. Rank-order each company from low to high liquidity (ability to pay liabilities as they come due). Do any of the companies have liquidity difficulties?
c. Compute the operating cash flow to CAPEX ratio for each company. Compared with the rule of thumb of 1.0, assess each company’s solvency as either low, medium, or high.
d. Rank-order each company from low to high solvency. Do any of the companies have solvency difficulties?

Round answers to two decimal places. For ranking, 1 is the highest and 4 is the lowest.

Operating Cash
Flow to Current Liquidity Operating Cash Solvency
Company Liabilities Rank Flow to CAPEX Rank
Arconic Inc. Answer Answer1234 Answer Answer1234
Carmax Inc. Answer Answer1234 Answer Answer1234
Flowserve Corp. Answer Answer1234 Answer Answer1234
Fluor Corp. Answer Answer1234 Answer Answer1234
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Answer #1

ANSWER:

Required a & b)

Operating cash flow to current liabilities ratio = Operating Cash Flow / Current Liabilities

Company Operating Cash Flow (A) Current liabilities (B) Ratio (C = A / B) Liquidity
Arconic Inc. 217 3,520 0.061 Low
Carmax Inc. 163 1,312 0.124 High
Flowserve Corp. 191 1,081 0.176 High
Fluor Corp. 162 3,553 0.045 Medium

All the companies may have Liquidity difficulties as the Operating cash flow to Current Liabilities ratio is less than 1. However, Arconic Inc will have a more liquidity difficulty as compared to the other three companies.

Required c & d)

Company Operating Cash Flow (A) CAPEX (B) Ratio (C = A / B) Liquidity
Arconic Inc. 217 768 0.282 Low
Carmax Inc. 163 305 0.534 Medium
Flowserve Corp. 191 84 2.273 High
Fluor Corp. 162 211 0.767 Medium

Yes, Arconic Inc. would have solvency difficulty.

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