RATIO ANALYSIS The Corrigan Corporation's 2017 and 2018 financialstatements follow, along with some industry average ratios.a. Assess Corrigan's liquidity position, and determine how itcompares with peers and how the liquidity position has changedover time.b. Assess Corrigan's asset management position, and determinehow it compares with peers and how its asset managementefficiency has changed over time.c. Assess Corrigan's debt management position, and determinehow it compares with peers and how its debt management haschanged over time.d. Assess Corrigan's profitability ratios, and determine how theycompare with peers and how its profitability position has changedover time.e. Assess Corrigan's market value ration, and determine how itsvaluation compares with peers and how it has changed over time.Assume the firm's debt is priced at par, so the market value of itsdebt equals its book value. f. Calculate Corrigan's ROE as well as the industry average ROE,using this DuPont equation. From this analysis, how doesCorrigan's financial position compare with the industry averagenumbers?g. What do you think would happens to its ratios if the companymil ailed cost-culling measures that allowed it to hold lower levelsof inventory and substantially decreased the cost of goods sold? Nocalculations die necessary. Think about which ratios would beaffected by changes in these two accounts.Corrigan Corporation: Balance Sheets as of December 31 2018 2017 cash $72,000 $65,000 Account recivable 439,000 328.000 Inventories 894,000 813,000 Tount current assets $1,405,000 $1,206,000 Land and bullding 258.000 271.000 Mechinary 132.000 133,000 Other fixed assets 61.000 57,000 Total assets $1,836,000 $1,667,000 Accounts payeble $80,000 $72,706 Accured liabilities 45,010 40,880 Notes payeble 476,990 457,912 Total current liablities $602.000 $571,500 Long term dept 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 corigan corporation: income statement for years ending December 31 2018 2017 sales $4,240,000 $36,35,000 cost of goods sold 3,680,600 2,980,000 Gross operating profits $560,000 $655,000 General adiministrative and selling express 303,320 297,550 Depreciation 159,000 154,500 EBIT $97,680 V 201050 Interest 67,000 43,000 Earning before taxes(EBT) $30,680 $159,950 Taxes(40) 12,272 63,970 Net income $18,400 $95,970 Per share data 2018 2017 EPS $080 $417 Cash dividends $1.10 $095 Market price (average) $12.34 $23 57 P/E ratio 15.42x 5.65x Number of share outstanding 23,000 23,000 Industry Financial Ratio 2018 Current ratio 2.7* Inventory Turnover 7.0* Days sales outstanding 32.0 days Fixed assetsTurnover 13.0* Total assets turnover 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* M/B ratio 1.5 EV/EBITDA ratio 6.0 *Industry average ratios have been constant for the past 4 years. *Based on year-end balance sheet figures. *Calculation is based on a 365 day year.

RATIO ANALYSIS The Corrigan Corporation's 2017 and 2018 financialstatements follow, along with some industry average ratios.a. Assess Corrigan's liquidity position, and determine how itcompares with peers and how the liquidity position has changedover time.b. Assess Corrigan's asset management position, and determinehow it compares with peers and how its asset managementefficiency has changed over time.c. Assess Corrigan's debt management position, and determinehow it compares with peers and how its debt management haschanged over time.d. Assess Corrigan's profitability ratios, and determine how theycompare with peers and how its profitability position has changedover time.e. Assess Corrigan's market value ration, and determine how itsvaluation compares with peers and how it has changed over time.Assume the firm's debt is priced at par, so the market value of itsdebt equals its book value. f. Calculate Corrigan's ROE as well as the industry average ROE,using this DuPont equation. From this analysis, how doesCorrigan's financial position compare with the industry averagenumbers?g. What do you think would happens to its ratios if the companymil ailed cost-culling measures that allowed it to hold lower levelsof inventory and substantially decreased the cost of goods sold? Nocalculations die necessary. Think about which ratios would beaffected by changes in these two accounts.Corrigan Corporation: Balance Sheets as of December 31 2018 2017 cash $72,000 $65,000 Account recivable 439,000 328.000 Inventories 894,000 813,000 Tount current assets $1,405,000 $1,206,000 Land and bullding 258.000 271.000 Mechinary 132.000 133,000 Other fixed assets 61.000 57,000 Total assets $1,836,000 $1,667,000 Accounts payeble $80,000 $72,706 Accured liabilities 45,010 40,880 Notes payeble 476,990 457,912 Total current liablities $602.000 $571,500 Long term dept 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 corigan corporation: income statement for years ending December 31 2018 2017 sales $4,240,000 $36,35,000 cost of goods sold 3,680,600 2,980,000 Gross operating profits $560,000 $655,000 General adiministrative and selling express 303,320 297,550 Depreciation 159,000 154,500 EBIT $97,680 V 201050 Interest 67,000 43,000 Earning before taxes(EBT) $30,680 $159,950 Taxes(40) 12,272 63,970 Net income $18,400 $95,970 Per share data 2018 2017 EPS $080 $417 Cash dividends $1.10 $095 Market price (average) $12.34 $23 57 P/E ratio 15.42x 5.65x Number of share outstanding 23,000 23,000 Industry Financial Ratio 2018 Current ratio 2.7* Inventory Turnover 7.0* Days sales outstanding 32.0 days Fixed assetsTurnover 13.0* Total assets turnover 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* M/B ratio 1.5 EV/EBITDA ratio 6.0 Industry average ratios have been constant for the past 4 years. Based on year-end balance sheet figures. *Calculation is based on a 365 day year.

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter4: Analysis Of Financial Statements

Section: Chapter Questions

Problem 25SP

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Related questions

Question

f. Calculate Corrigan's ROE as well as the industry average ROE,
using this DuPont equation. From this analysis, how does
Corrigan's financial position compare with the industry average
numbers?
g. What do you think would happens to its ratios if the company
mil ailed cost-culling measures that allowed it to hold lower levels
of inventory and substantially decreased the cost of goods sold? No
calculations die necessary. Think about which ratios would be
affected by changes in these two accounts.
Corrigan Corporation: Balance Sheets as of December 31

2018

2017

cash

$72,000

$65,000

Account recivable

439,000

328.000

Inventories

894,000

813,000

Tount current assets

$1,405,000

$1,206,000

Land and bullding

258.000

271.000

Mechinary

132.000

133,000

Other fixed assets

61.000

57,000

Total assets

$1,836,000

$1,667,000

Accounts payeble

$80,000

$72,706

Accured liabilities

45,010

40,880

Notes payeble

476,990

457,912

Total current liablities

$602.000

$571,500

Long term dept

404,290

258,898

Common stock

575,000

Retained earnings

254,710

261,602

Total liabilities and equity

$1,836,000

$1,667,000

corigan corporation: income statement for years ending December 31

2018

2017

sales

$4,240,000

$36,35,000

cost of goods sold

3,680,600

2,980,000

Gross operating profits

$560,000

$655,000

General adiministrative and selling express

303,320

297,550

Depreciation

159,000

154,500

EBIT

$97,680

V 201050

Interest

67,000

43,000

Earning before taxes(EBT)

$30,680

$159,950

Taxes(40)

12,272

63,970

Net income

$18,400

$95,970

Per share data

2018

2017

EPS

$080

$417

Cash dividends

$1.10

$095

Market price (average)

$12.34

$23 57

P/E ratio

15.42x

5.65x

Number of share outstanding

23,000

Industry Financial Ratio

2018

Current ratio

2.7*

Inventory Turnover

7.0*

Days sales outstanding

32.0 days

Fixed assetsTurnover

13.0*

Total assets turnover

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*

M/B ratio

1.5

EV/EBITDA ratio

6.0

*Industry average ratios have been constant for the past 4 years.

*Based on year-end balance sheet figures.

*Calculation is based on a 365 day year.

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