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the balloon payment due in 1989 as required by the agreements
between themselves and LIIBV.
3. Petitioners' Tangible Net Worth and Financial Ratios
for the Years in Issue
LTI or LII guaranteed repayment of advances from LIIBV and
commercial banks to Transit, Tree, and LWSI. Financial
statements for those companies for the years in issue (unaudited
for LII for the year ending August 1988) show the following:
LII
1985 1986 1987 1988
Tangible Net Worth 57,022 84,341 42,659 (22,630)
(000 omitted)
Quick Ratio1 .93 1.12 1.30 1.17
Current Ratio1 1.33 1.62 1.62 1.32
Debt/Equity Ratio .59 .67 3.54 8.43
Liabilities/Equity .87 .89 4.05 9.42
Liab./Tang. N.W. 1.38 1.31 13.35 N/A
LTI
1985 1986 1987 1988
Tangible Net Worth 18,865 28,400 (33,204) (58,027)
(000 omitted)
Quick Ratio .87 .76 .83 1.02
Current Ratio 1.16 1.36 1.12 1.58
Debt/Equity Ratio 1.61 2.26 5.78 5.63
Liabilities/Equity 2.76 3.26 7.29 6.44
Liab./Tang. N.W. 9.93 12.02 N/A N/A
1 "Current ratio" is current assets (cash and
equivalents, receivables, and inventories) divided by
current liabilities. "Quick ratio" is cash and
equivalents and receivables, or current assets less
inventories, divided by current liabilities. See
Carmichael, et al., Accountant's Handbook, sec. 10.25,
at 10.22 (7th ed. 1991).
Petitioners' competitors in the waste services industry
during 1987 and 1988 generally had debt to equity ratios below 2
to 1.
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