# (Solved Homework): Calculating Ratios and Estimating Credit Rating…

Calculating Ratios and Estimating Credit Rating
The following data are from Under Armour’s 2015 10-K report (\$ thousands).

 Revenue \$3,984,757 Earnings from continuing operations \$225,907 Interest expense 14,517 Capital expenditures (CAPEX) 298,928 Tax expense 154,112 Total debt 669,000 Amortization expense 13,840 Average assets 2,481,992 Depreciation expense 98,600

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

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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.

Round answers to one decimal place (percentage ex: 0.2345 = 23.5%)

Moody’s
Ratio rating

a. EBITA/Average assets = 4,265,826 / 2,481,992 = 1.7187= 171.87%

Earnings before interest, taxes, and amortization (EBITA) = Revenue + Interest + Taxes + Amortization expense+ depreciation expense

= 3,984,757 + 14,517 + 154,112 + 13,840 +98,600 = \$4,265,826

, EBITA Margin= EBITA / Total Revenue = 4,265,826 / 3,984,757 = 1.07705 = 107.05%

, EBITA/Interest expenses= 4,265,826 / 14,517 = 293.85

Debt/EBITDA = 669,000 / 4,265,826 = 0.1568 = 15.7%

CAPEX/Depreciation Expense = 298,928 / 98,600 = 3.0317 = 303.17%

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