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Case 6: Pierce and Snowden
Wellington Mart vs Wagner Stores

1. Solvency Position and Rating
Wellington Mart 2011 2010
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Current Ratio 26520/356750 = .467 33950/31250 = 1.08
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Quick Ratio 22320/56750 = .39 18150/31250 = .58
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Total Liab/Equity 115338/144982 = .79 71290/114460 = .62
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Receivables Turnover 150000/(18450+12000/2) = 9.85 or 37 days
Wagner 2011 2010
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Current Ratio 31720/16100 = 1.97 31200/9100 = 3.43
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Quick Ratio 13220/16100 = .82 16400/9100 = 1.8
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Total Liab/Equity 56573/31433 = 1.79 33570/22250 = 1.51
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Receivables Turnover 72000/(7250+9400/2) = 8.65 or 42 days
Wellington – ratios have all decreased but the Total Liabilities to Equity Ratio a. Could be due to the acquisition of Marilyn Estate. Statement of Cash Flows indicates that they paid 50 million in cash b. Also, they purchased additional buildings and machinery of 23 million according to Statement of Cash Flows c. Total liabilities to Equity has increased. This could be due to the issuance of long term notes payables of 13,900 and it looks like they have a Retirement Liability they didn’t have in 2010 of 6,200. d. The account payables has increased significantly within one year. They didn’t pay 13,500 of their obligations. e. Lease – treat as a capital lease. They have payments of 12 million per year and they have 6 more years left so if N=6, i=10%, PMT= 12,000, and PV = 52,263.13 f. Bond Covenant indicates that the

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