Display both the company ratio and the industry benchmark

Assignment Help Corporate Finance

Reference no: EM13900726

Crane Plastics Company has provided the following comparative information:

	2008	2007	2006	2005	2004
Net income	$ 30,000	$ 50,000	$ 100,000	$ 150,000	$ 150,000
Interest expense	102,000	95,000	85,000	80,000	75,000
Income tax expense	9,000	15,000	30,000	45,000	45,000
Total assets (ending balance)	1,600,000	1,500,000	1,350,000	1,200,000	1,000,000
Total stockholders' equity (ending balance)	580,000	550,000	500,000	400,000	250,000
Average total assets	1,550,000	1,425,000	1,275,000	1,100,000	900,000
Average stockholders' equity	565,000	525,000	450,000	325,000	225,000

You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years:

	2004-2008
Rate earned on total assets	7%
Rate earned on stockholders' equity	20%
Number of times interest charges earned	3.0
Ratio of liabilities to stockholders' equity	2.0

Instructions

1. Prepare four line graphs with the ratio on the vertical axis and the years on the horizontal axis for the following four ratios (rounded to two decimal places):

a. Rate earned on total assets

b. Rate earned on stockholders' equity

c. Number of times interest charges earned

d. Ratio of liabilities to stockholders' equity

Display both the company ratio and the industry benchmark on each graph. That is, each graph should have two lines.

2. Prepare an analysis of the graphs in (1).

Reference no: EM13900726

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