Interpreting Financial Statements: Ratio Calculations
Sigma Designs repaid much of its long term debt between January 31, 1994 and
January 31, 1995. Its liabilities and stock holders’ equity at January 31 were as follows
(dollars in thousands):
|
1995 |
1994 |
|
|
Total current liabilities |
$13,564 |
$ 8,622 |
|
Total long term liabilities |
1,102 |
1,518 |
|
Total shareholders’ equity |
18,721 |
16,499 |
|
Total liabilities and equity |
$33,387 |
$26,639 |
Required
a. Calculate Sigma Designs’ debt and equity composition ratios (vertical analysis).
b. Using only the information shown above, what does this evidence say, pro and con, about Sigma Designs’ ability to meet its liabilities? Would this suggest
a high or low likelihood of bankruptcy? Why?
c. What other information would be helpful in assessing the firm’s liquidity? Its default risk?