Question: Ratio analysis The Corrigan Corporation’s 2004 and 2005 financial statements follow,

along with some industry average ratios.

1. Assess Corrigan’s liquidity position, and determine how it compares with peers and how the liquidity position has changed over time.
2. Assess Corrigan’s asset management position, and determine how it compares with peers and how its asset management efficiency has changed over time.
3. Assess Corrigan’s debt management position, and determine how it compares with
   peers and how its debt management has changed over time.
4. Assess Corrigan’s profitability ratios, and determine how they compare with peers
   and how the profitability position has changed over time.
5. Assess Corrigan’s market value ratios, and determine how their valuation compares
   with peers and how it has changed over time.
6. Calculate Corrigan’s ROE, as well as the industry average ROE, using the extended
   Du Pont equation. From this analysis, how does Corrigan’s financial position compare with the industry average numbers?
7. 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

2005 2004

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

Price: $2.99

Solution: The downloadable solution consists of 6 pages
Deliverable: Word Document