Reference no: EM13971197
RATIO ANALYSIS:
The Corrigan Corporation's 2007 and 2008 financial statements follow, along with some industry average ratios.
a. Assess Corrigan's liquidity position and determine how it compares with peers and how the liquidity position has changed over time.
b. Assess Corrigan's asset management position and determine how it compares with peers and how its asset management efficiency has changed over time.
c. Assess Corrigan's debt management position and determine how it compares with peers and how its debt management has changed over time.
d. Assess Corrigan's profitability ratios and determine how they compare with peers and how its profitability position has changed over time.
e. Assess Corrigan's market value ratios and determine how its valuation compares with peers and how it has changed over time.
f. Calculate Corrigan's ROE as well as the industry average ROE using the DuPont equation. From this analysis, how does Corrigan's financial position compare with the industry average numbers?
g. What do you think would happen to its ratios if the company initiated cost-cutting measures that allowed it to hold lower levels of inventory and substantially decreased the cost of goods sold? No calculations are necessary. Think about which ratios would be affected by changes in these two accounts.
Corrigan Corporation: Balance Sheets as of December 31
|
|
2008
|
|
2007
|
|
Cash
|
$ 72,000
|
|
$ 65,000
|
|
Accounts receivable
|
439,000
|
|
328,000
|
|
Inventories
|
894,000
|
|
813,000
|
|
Total current assets
|
$1,405,000
|
|
$1,206,000
|
|
Land and building
|
238,000
|
|
271,000
|
|
Machinery
|
132,000
|
|
133,000
|
|
Other fixed assets
|
61,000
|
|
57,000
|
|
Total assets
|
$1,836,000
|
|
$1,667,000
|
|
Accounts and notes payable
|
$ 432,000
|
|
$ 409,500
|
|
Accrued liabilities
|
170,000
|
|
162,000
|
|
Total current liabilities
|
$ 602,000
|
|
$ 571,500
|
|
Long-term debt
|
404,290
|
|
258,898
|
|
Common stock
|
575,000
|
|
575,000
|
|
Retained earnings
|
254,710
|
|
261,602
|
|
Total liabilities and equity
|
$1,836,000
|
|
$1,667,000
|
Corrigan Corporation: Income Statements for Years Ending December 31
|
|
2008
|
|
2007
|
|
Sales
|
$4,240,000
|
|
$3,635,000
|
|
Cost of goods sold
|
3,680,000
|
|
2,980,000
|
|
Gross operating profit
|
$ 560,000
|
|
$ 655,000
|
|
General administrative and selling expenses
|
236,320
|
|
213,550
|
|
Depreciation
|
159,000
|
|
154,500
|
|
Miscellaneous
|
134,000
|
|
127,000
|
|
Earnings before taxes (EBT)
|
$ 30,680
|
|
$ 159,950
|
|
Taxes (40%)
|
12,272
|
|
63,980
|
|
Net income
|
$ 18,408
|
|
$ 95,970
|
|
|
Per-Share Data
|
|
|
|
|
|
2008
|
2007
|
|
EPS
|
|
$0.80
|
$4.17
|
|
Cash dividends
|
|
$1.10
|
$0.95
|
|
Market price (average)
|
|
$12.34
|
$23.57
|
|
P/E ratio
Number of shares outstanding
|
|
15.4X
23,000
|
5.65X
23,000
|
Industry Financial Ratiosa
2008
Current ratio 2.7X
Inventory turnoverb 7.0X
Days sales outstandingc 32 days
Fixed assets turnoverb 13.0X
Total assets turnoverb 2.6X
Return on assets 9.1%
Return on equity 18.2%
Debt ratio 50.0%
Profit margin 3.5%
P/E ratio 6.0X
Price/cash flow ratio 3.5X
aIndustry average ratios have been constant for the past 4 years.
bBased on year-end balance sheet figures.
cCalculation is based on a 365-day year.
|
How much should you be willing to pay for bond
: Bond X is noncallable and has 20 years to maturity, a 9% annual coupon, and a $1,000 par value. Your required return on Bond X is 11%; and if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5, years the yie..
|
|
Yield to maturity of a five-year
: What is the yield to maturity of a five-year, $5000 bond with a 4.5% coupon rate and semiannual coupons if this bond is currently trading for a price of $4876?
|
|
Problem regarding the npv of the scenario
: Assume this project has average risk. What is the NPV of the scenario that goes from the start and ends with YYC going through with the new sailboat and facing strong economy in the end?
|
|
Find the depreciation for the indicated year
: Find the depreciation for the indicated year using MACRS cost-recovery rates for the properties placed in service at midyear. Round dollar amounts to the nearest cent. Property Class Depreciation Year Cost of Property 3-year 3 $86,600.00 $28,863.78 $..
|
|
Decreased the cost of goods sold
: Calculate Corrigan's ROE as well as the industry average ROE using the DuPont equation. From this analysis, how does Corrigan's financial position compare with the industry average numbers?
|
|
Deposit your savings in an account that pays
: You want to buy a new sports car 3 years from now, and you plan to save $7,400 per year, beginning one year from today. You will deposit your savings in an account that pays 5.2% interest. How much will you have just after you make the 3rd deposit, 3..
|
|
Is she in time to collect any evidence from the road
: Inspector Carol Ketchum is in pursuit of a Midnight Chemical truck that has spread waste solvents, mostly cis-1,2-dichloroethene, in a uniform layer 2 mm thick on the roadway. She arrives 20 min after the truck has finished emptying its load. Is ..
|
|
How much has abc left on the table
: How many shares must be sold to bet $30 million? What are ABC's total costs for the IPO?
|
|
Analyze how the enterprise architecture affects organization
: This assignment gives you the opportunity to apply your critical thinking skills and understanding of the course concepts to analyze how the enterprise architecture (EA) affects various elements of the organization
|