A B C D E F G

Given the following Financial statements calculate the ratios and answer the questions a-g
1 below. You should be providing an answer anywhere you see a colored cell. Ratios must
be formulas and cannot be typed numbers. Answers to the questions should be complete
and concise.
2
3 Corrigan Corporation's December 31 Balance Sheets
4
5 Assets 2021 2020
6 Cash $ 72,000 $ 65,000
7 Accounts receivable 439,000 328,000
8 Inventories 894,000 813,000
9 Total current assets $ 1,405,000 $ 1,206,000
10 Land and building 238,000 271,000
11 Machinery 132,000 133,000
12 Other fixed assets 61,000 57,000
13 Total assets $ 1,836,000 $ 1,667,000
14
15 Liabilities and equity
16 Accounts payable $ 80,000 $ 72,708
17 Accrued liabilities 45,010 40,880
18 Notes payable 476,990 457,912
19 Total current liabilities $ 602,000 $ 571,500
20 Long-term debt 399,688 258,898
21 Common stock 575,000 575,000
22 Retained earnings 259,312 261,602
23 Total liabilities and equity $ 1,836,000 $ 1,667,000
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25 Corrigan Corporation's December 31 Income Statements
26 2021 2020
27 Sales $ 4,240,000 $ 3,635,000
28 Cost of goods sold 3,680,000 2,980,000
29 Gross operating profit $ 560,000 $ 655,000
30 General admin. and selling expenses 303,320 297,550
31 Depreciation 159,000 154,500
32 EBIT $ 97,680 $ 202,950
33 Interest 67,000 43,000
34 EBT $ 30,680 $ 159,950
35 Taxes (25%) 7,670 39,988
36 Net income $ 23,010 $ 119,963
37
38 Per-Share Data 2021 2020
39 EPS $1.00 $5.22
40 Cash dividends $1.10 $0.95
41 Market price (average) $12.34 $23.57
42 P/E ratio 12.33 4.52
43 Number of shares outstanding 23,000 23,000
44
45 Once we have this information set, we can calculate the necessary ratios for this analysis.
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47 Ratio Analysis 2021 2020 Industry Avg a

48 Liquidity
49 Current ratio 2.7
50 Asset Management
51 Inventory turnoverb 7.0
52 Days sales outstandingc 32
53 Fixed assets turnover b
13.0
54 Total assets turnoverb
2.6
55 Profitability
56 Return on assets 11.4%
57 Return on equity 18.2%
58 Return on invested capital 14.5%
59 Profit margin 4.4%
60 Debt Management
61 Debt-to-capital ratiod 50.0%
62 Market Value
63 P/E ratio 6.0
64 M/B ratio 1.5
65 EV/EBITDA ratio 6.0
66
67 a
Industry average ratios have been constant for the past 4 years.
68 b
Based on year-end balance sheet figures.
69 c
Calculation is based on a 365-day year.
70 Measured as (Short-term debt + Long-term debt)/(Short-term debt + Long-term debt + Common equity).
d

71
72 a. Assess Corrigan's liquidity position, and determine how it compares with peers and how the liquidity
73 position has changed over time.
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78 b. Assess Corrigan's asset management position, and determine how it compares with peers and
79 how its asset management efficiency has changed over time.
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87 c. Assess Corrigan's debt management position, and determine how it compares with peers and how its
88 debt management has changed over time.
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94 d. Assess Corrigan's profitability ratios, and determine how they compare with peers and how its
95 profitability position has changed over time.
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100 e. Assess Corrigan's market value ratios, and determine how its valuation compares with peers
101 and how it has changed over time. Assume the firm's debt is priced at par, so the market value
102 of its debt equals its book value.
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111 f. Calculate Corrigan's ROE using the DuPont equation.
112 From this analysis, how does Corrigan's financial position compare with the industry
113 average numbers?
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115 ROE = PM x TA Turnover x Equity Multiplier
116 2021
117 2020
118 Industry Avg. 18.20% 4.40% 2.60 1.60
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129 g. What do you think would happen to its ratios if the company initiated cost-cutting measures that
130 allowed it to hold lower levels of inventory and substantially decreased the cost of goods sold? No
131 calculations are necessary. Think about which ratios would be affected by changes in these
132 two accounts.
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