The Corrigan Corporation€™s 2015 and 2016 financial statements follow, along with some industry average ratios.
a. Assess Corrigan€™s liquidity position, and determine how it compares with peers and how the liquidity position has changed over time.
b. Assess Corrigan€™s asset management position, and determine how it compares with peers and how its asset management efficiency has changed over time.
c. Assess Corrigan€™s debt management position, and determine how it compares with peers and how its debt management has changed over time.
d. Assess Corrigan€™s profitability ratios, and determine how they compare with peers and how its profitability position has changed over time.
e. Assess Corrigan€™s market value ratios, and determine how its valuation compares with peers and how it has changed over time.
f. Calculate Corrigan€™s ROE as well as the industry average ROE, using the DuPont equation. From this analysis, how does Corrigan€™s 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.

Transcribed Image Text:

Corrigan Corporation: Balance Sheets as of December 31 2016 2015 $ 72,000 $ 65,000 Cash Accounts receivable 439,000 328,000 894,000 Inventories 813,000 Total current assets $1,405,000 $1,206,000 Land and building Machinery 238,000 271,000 132,000 133,000 Other fixed assets 61,000 57,000 Total assets $1,836,000 $1,667,000 $ 80,000 $ 72,708 Accounts payable Accrued liabilities 45,010 40,880 Notes payable 476,990 457,912 $ 571,500 $ 602,000 Total current liabilities Long-term debt 404,290 258,898 Common stock 575,000 575,000 261,602 $1,667,000 Retained earnings 254,710 $1,836,000 Total liabilities and equity Corrigan Corporation: Income Statements for Years Ending December 31 2016 2015 Sales $4,240,000 $3,635,000 3,680,000 $ 560,000 Cost of goods sold 2,980,000 Gross operating profit General administrative and selling expenses $ 655,000 297,550 303,320 Depreciation 159,000 154,500 $ 202,950 43,000 $ 159,950 EBIT $ 97,680 67,000 $ 30,680 12,272 $ 18,408 Interest Earnings before taxes (EBT) Taxes (40%) 63,980 Net income $ 95,970