Solution-Calculating ratios and estimating credit rating

Calculating ratios and estimating credit rating

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Reference no: EM132462693

Question 1: Calculating Ratios and Estimating Credit Rating

The following data are from Under Armour's 2015 10-K report ($ thousands).

Revenue	$3,963,313	Earnings from continuing operations	$232,573
Interest expense	14,628	Capital expenditures (CAPEX)	298,928
Tax expense	154,112	Total debt	669,000
Amortization expense	13,840	Average assets	2,481,992
Depreciation expense	87,100

Point a. Use the data above to calculate the following ratios: EBITA/Average assets, EBITA Margin, EBITA/Interest expenses, Debt/EBITDA, CAPEX/Depreciation Expense.

Point b. Using the ratios you calculate in part a., estimate the credit rating that Moody's might assign to Under Armour.
Refer to Exhibit 7.6 in the textbook for ratio definitions and credit ratings.

Hint: Earnings from continuing operations is Under Armour's net income.
Round answers to one decimal place (percentage ex: 0.2345 = 23.5%)

	Ratio	Moody's rating
EBITA/Avg. assets	16.73 % x Aaa	⁴4	V
EBITA margin	10.47 % X B
EBITA/Int. expense	289.4 x Aaa	*
Debt/EBITDA	15.8 x Aaa		X
CAPEX/Dep. expense	7.1 x Aaa	0	V

Reference no: EM132462693

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Calculating ratios and estimating credit rating

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Reference no: EM132462693

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