An improvement in the proportion of a company's assets that are financed with debt would be shown by: a decrease in the current ratio an increase in the debt ratio an increase in the current ratio a decrease in the debt ratio
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- RATIO ANALYSIS The Corrigan Corporations 2015 and 2016 financial statements follow, along with some industry average ratios. a. Assess Corrigans liquidity position, and determine how it compares with peers and how the liquidity position has changed over time. b. Assess Corrigans asset management position, and determine how it compares with peers and how its asset management efficiency has changed over time. c. Assess Corrigans debt management position, and determine how it compares with peers and how its debt management has changed over time. d. Assess Corrigans profitability ratios, and determine how they compare with peers and how its profitability position has changed over time. e. Assess Corrigans market value ratios, and determine how its valuation compares with peers and how it has changed over time. f. Calculate Corrigans ROE as well as the industry average KOE, using the DuPont equation. From this analysis, how does Corrigans 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 2016 2015 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 payable 80,000 72,708 Accrued liabilities 45,010 40,880 Notes payable 476,990 457,912 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 2016 2015 Sales 4,240,000 3,635,000 Cost of goods sold 3,680,000 2,980,000 Cross operating profit 560,000 655,000 General administrative and selling expenses 303,320 297,550 Depreciation 159,000 154,500 EBIT 97,680 202,950 Interest 67,000 43,000 Earnings before taxes (EBT) 30,680 159,950 Taxes (40%) 12,272 63,980 Net income 18,408 95,970 Per-Share Data 2016 2015 EPS 0.80 4.17 Cash dividends 1.10 0.95 Market price (average) 12.34 23.57 P/E ratio 15.42 5.65 Number of shares outstanding 23,000 23,000 Industry Financial Ratiosa 2016 Current ratio 2.7 Inventory turnoverb 7.0 Days sales outstandingc 32.0 days Fixed assets turnoverb 13.0 Total assets turnoverb 2.6 Return on assets 9.1% Return on equity 18.2% Return on invested capital 14.5% Profit margin 3.5% Debt-to-capital ratio 50.0% P/E ratio 6.0 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.Match each definition that follows with the term (a–h) it defines. Question 7 options: a company's ability to make interest payments and repay debt at maturity focuses on a company’s ability to generate net income useful for comparing one company to another or to industry averages use debt to increase the return on an investment measures the risk that interest payments will not be made if earnings decrease the percentage analysis of the relationship of each component in a financial statement to a total within the statement a percentage analysis of increases and decreases in related items on comparative financial statements an analysis of a company’s ability to pay its current liabilities 1. solvency 2. leverage 3. times interest earned 4. horizontal analysis 5. vertical analysis 6. common-sized financial statements 7. current position analysis 8.…8. For a company holding significant net financial assets (NFO), after issuing some new debt, its risk in operation should be_____ as before issuing the debt; and its required rate of return of equity should be ______ as before. A. the same as .... the same asB. lower than ... lower thanC. higher than ... higher thanD. the same as ... higher than
- Question 22 Which of the following is generally a long term source of finance? A Corporate Bonds B Debt factoring C Trade Credit D OverdraftP4 The fraction of a firm’s total financing that is represented by debt is a measure of its: efficiency. financial leverage. operating leverage. financial security.Module 6 Question 5: Part 1 a. Calculate the times interest earned ratio for each of the years for which you have data. b. What is your assessment of how the firm's ability to service its debt obligations has changed over this period?
- What is the company's cost of debt? a. 9.21%b. 10.31%c. 11.5%d. 7.73% What is the company's cost of equity using the Capital Asset Pricing Model? a. 9.21%b. 10.31%c. 11.5%d. 7.73%1. Which of the following companies is in better position to pay its short-term debt? * a. Company A b. Company B c. Company CThe Debt to Equity ratio calculation measures Group of answer choices c. How much debt the company has for every dollar of Equity b. The amount of Assets that are financed by debt None of the above a. The ability of the company to pay its’ current obligations
- QUESTION 30 If a loss contingency related to a lawsuit against a firm is deemed to have a reasonable probability of requiring ultimate payment, then the proper accounting treatment of the loss contingency will require footnote disclosure. decrease the debt/asset ratio. increase the accounts payable/sales ratio. decrease the debt/equity ratio.1. The leverage ratio is the proportion of debts that a bank has compared to its equity/capital. Please answer one that is most correct Select one: a. Debt to Equity = Total debt / Shareholders Equity. b. Debt to Capital = Total debt / Capital (debt+equity) c. There are different leverage ratios such as. Debt to Equity = Total debt / Shareholders Equity. Debt to Capital = Total debt / Capital (debt+equity) Debt to Assets = Total debt / Assets. 2. Which of the following amortization methods is most likely to evenly distribute the cost of an intangible asset over its useful life? Select one: a. Units-of-production method. b. Straight-line method. c. Double-declining balance method 3. What ratio is a cash and marketable securities based (it removes Inventory) ? Select one: a. Quick Ratio b. Current Ratio c. Dupont Analysis set of ratios 4. Which of the following is an appropriate method of computing free cash flow to the firm? Select one: a. Add operating cash flows to…which one is correct please confirm? Q24: In determining the cost of debt, several factors must be considered. All of the following are those factors EXCEPT ____. a. flotation costs b. the firm’s growth rate of dividends c. the firm’s before-tax cost of debt d. the firm’s tax rate
