Cranston Dispensers, Inc.: Part 2 In the Chapter 13 mini-case, you learned that Cranston Dispensers, Inc. manufactures specialized pump and spray containers for a variety of products in the cosmetics, household cleaning supplies, and pharmaceutical industries For most of 2013 and 2014, the price of Cranston's shares began falling, while shares of other companies in the industry were rising. The CFO has charged Susan McNulty, the recently appointed treasure, with diagnosing Cranston's problems and improving the company's financial performance relative to its competitors. She has already reviewed Cranston's working capital management policies and will continue her analysis with a thorough review of the financial statements She has gathered income statements, balance sheets, and additional information for the three most recent years. Her assistant also has found a ratio TUBU Interest expense (net of interest income) 0.77 0.52 Earnings before taxes 9.29% 10.28 % 100% A B D E 2013 2012 2760.03 3201.97 2172.12 1029.85 477.82 1 Income Statements 2 Account 3 Sales 4 Cost of goods sold 5 Gross profit (margin) 6 Selling, general, and administrative expenses 7 Depreciation 8 EBIT 9 Interest expense 10 Earnings before taxes 11 Taxes 12 Net income 13 2014 3784.15 2567.88 1216.27 550.21 247.17 418.89 20.53 398.36 119.51 278.85 230.04 321.99 24.64 297.35 89.21 208.14 1855.93 904.1 406.07 199.92 298.11 14.35 283.76 85.13 198.63 14 B D E F G H 2014 2013 2014 2013 2012 341.06 721.89 595.22 1658.17 276.14 642.11 512.13 1430.38 1 Balance Sheets 2 ASSETS 3 Current assets 4 Cash 5 Accounts receivable 6 Inventory 7 Total current assets 8 9 Net fixed assets 10 11 12 13 14 TOTAL ASSETS 15 2012 LIABILITIES Current liabilities 235.91 Accounts payable 320.08 Accrued expenses 387.95 Short-term debt 943.94 Total current liabilities Long-term debt 1571.93 other liabilities Total liabilities OWNERS' EQUITY Common equity TOTAL LIABILITIES |AI OWNERS' EQUITY 332.16 343.1 503.15 1178.41 398.06 238.94 1815.41 288.25 335.03 490.86 1114.14 324.12 154.1 1592.36 203.87 192.2 243.03 639.1 288.88 147.05 1075.03 1822.13 1691.16 1664.89 1529.18 1440.84 480 3480.3 3121.54 2515.87 ical industries. The CFO 2014, the ed treasure capital man ome stater 13 and up Data Table -X its compe Her assist nterest inca Stock price per share Dividend per share Shares outstanding (millions) 2014 $33.12 $1.05 143.2 2013 $37.95 $0.88 143.2 2012 $32.06 $0.68 143.2 analysis for fiscal 2012 and 2013 and updated industry benchmarks from published sources Questions 1. Following are Cranston's common-size income statements and balance sheets for 2013 and 2012. Prepare a common size income statement and balance sheet for 2014 2. Complete the 2014 table of financial ratios for Cranston 3. Use the common size statements and the ratio analysis that you have prepared to comment on Cranston's: a. liquidity con TUUS 70 10.000 Interest expense (net of interest income) 0.77 0.52 Eamnings before taxes 9.29% 10.28% QU 5. WE LEURS. MINI-CASE 14 (static) 3. Use the common-size statements and the ratio analysis that you have prepared to comment on Cranston's: a. liquidity b. solvency c. asset management d. profitability e market performance Indicats, whether the ratios are improving or deteriorating over the three-vear period and whether they are better or worse than the 2014 industry averages Interest expense (net of interest income) % 0.77 0.52 Earnings before taxes 9.29% 10.28 % Taxes % 2.79 Net Income % 5,50 % 3.08 Question H b. solvency c. asset management d. profitability e. market performance. Indicate whether the ratios are improving or deteriorating over the three-year period and whether they are better or worse than the 2014 industry averages 4. Express Cranston's ROE in terms of the DuPont identity. Which ratios are contributing to Cranston's below-average ROE? 5. Based on your analyses in Questions 1 through 4, why do you think Cranston's recent stock performance has been disappointing? CON TU.06% TU.BU Interest expense (net of interest income) % 0.77 0.52 Earnings before taxes % 9.29% 10.28 % Taxes % 2.79 3.08 Net Income 6.50 Cranston Dispensers, Inc.: Part 2 In the Chapter 13 mini-case, you learned that Cranston Dispensers, Inc. manufactures specialized pump and spray containers for a variety of products in the cosmetics, household cleaning supplies, and pharmaceutical industries For most of 2013 and 2014, the price of Cranston's shares began falling, while shares of other companies in the industry were rising. The CFO has charged Susan McNulty, the recently appointed treasure, with diagnosing Cranston's problems and improving the company's financial performance relative to its competitors. She has already reviewed Cranston's working capital management policies and will continue her analysis with a thorough review of the financial statements She has gathered income statements, balance sheets, and additional information for the three most recent years. Her assistant also has found a ratio TUBU Interest expense (net of interest income) 0.77 0.52 Earnings before taxes 9.29% 10.28 % 100% A B D E 2013 2012 2760.03 3201.97 2172.12 1029.85 477.82 1 Income Statements 2 Account 3 Sales 4 Cost of goods sold 5 Gross profit (margin) 6 Selling, general, and administrative expenses 7 Depreciation 8 EBIT 9 Interest expense 10 Earnings before taxes 11 Taxes 12 Net income 13 2014 3784.15 2567.88 1216.27 550.21 247.17 418.89 20.53 398.36 119.51 278.85 230.04 321.99 24.64 297.35 89.21 208.14 1855.93 904.1 406.07 199.92 298.11 14.35 283.76 85.13 198.63 14 B D E F G H 2014 2013 2014 2013 2012 341.06 721.89 595.22 1658.17 276.14 642.11 512.13 1430.38 1 Balance Sheets 2 ASSETS 3 Current assets 4 Cash 5 Accounts receivable 6 Inventory 7 Total current assets 8 9 Net fixed assets 10 11 12 13 14 TOTAL ASSETS 15 2012 LIABILITIES Current liabilities 235.91 Accounts payable 320.08 Accrued expenses 387.95 Short-term debt 943.94 Total current liabilities Long-term debt 1571.93 other liabilities Total liabilities OWNERS' EQUITY Common equity TOTAL LIABILITIES |AI OWNERS' EQUITY 332.16 343.1 503.15 1178.41 398.06 238.94 1815.41 288.25 335.03 490.86 1114.14 324.12 154.1 1592.36 203.87 192.2 243.03 639.1 288.88 147.05 1075.03 1822.13 1691.16 1664.89 1529.18 1440.84 480 3480.3 3121.54 2515.87 ical industries. The CFO 2014, the ed treasure capital man ome stater 13 and up Data Table -X its compe Her assist nterest inca Stock price per share Dividend per share Shares outstanding (millions) 2014 $33.12 $1.05 143.2 2013 $37.95 $0.88 143.2 2012 $32.06 $0.68 143.2 analysis for fiscal 2012 and 2013 and updated industry benchmarks from published sources Questions 1. Following are Cranston's common-size income statements and balance sheets for 2013 and 2012. Prepare a common size income statement and balance sheet for 2014 2. Complete the 2014 table of financial ratios for Cranston 3. Use the common size statements and the ratio analysis that you have prepared to comment on Cranston's: a. liquidity con TUUS 70 10.000 Interest expense (net of interest income) 0.77 0.52 Eamnings before taxes 9.29% 10.28% QU 5. WE LEURS. MINI-CASE 14 (static) 3. Use the common-size statements and the ratio analysis that you have prepared to comment on Cranston's: a. liquidity b. solvency c. asset management d. profitability e market performance Indicats, whether the ratios are improving or deteriorating over the three-vear period and whether they are better or worse than the 2014 industry averages Interest expense (net of interest income) % 0.77 0.52 Earnings before taxes 9.29% 10.28 % Taxes % 2.79 Net Income % 5,50 % 3.08 Question H b. solvency c. asset management d. profitability e. market performance. Indicate whether the ratios are improving or deteriorating over the three-year period and whether they are better or worse than the 2014 industry averages 4. Express Cranston's ROE in terms of the DuPont identity. Which ratios are contributing to Cranston's below-average ROE? 5. Based on your analyses in Questions 1 through 4, why do you think Cranston's recent stock performance has been disappointing? CON TU.06% TU.BU Interest expense (net of interest income) % 0.77 0.52 Earnings before taxes % 9.29% 10.28 % Taxes % 2.79 3.08 Net Income 6.50
