FINANCIAL MANAGEMENT.

Question 3.13 a) Calculate the ratios as given in the question b) From (a), analyse each ratios compare the performance of the company vs Industry c) Outline Morton's strengths and weaknesses as revealed by your analysis according to liquidity, efficiency, profitability and the debt ratio. d) Refer as stated in the question.

(3-13) Comprehensive Rono Analysis Data for Morton Chip Company and its industry averages follow. a. Calculate the indicated ratins for Morton b. Construct the extended Du Pont equation for both Morton and the industry c. Outline Morton's strengths and weaknesses as revealed by your analysis. d. Suppose Morton had doubled its sales as well as its inventories, accounts recen able, and common equity during 2010. How would that information affect the validity of your ratio analysie (Hint: Think about averages and the effects of rapid growth on ratios if averages are not used. No calculations are needed) ental Concepts of Corporate Finance Morton Chip Company: Balance Sheet as of December 31, 2010 (Thousands of Dollars) $129,000 Cash $ 77,500 Accounts payable 84,000 Receivables Notes payable 336,000 117,000 Inventories Other current liabilities 241,500 Total current assets $655,000 Total current liabilities $330,000 Net fixed assets 292,500 Long-term debt 256,500 Common equity 361.000 $947,500 Total liabilities and equity $947,500 Total assets Morton Chip Company: Income Statement for Year Ended December 31, 2010 (Thousands of Dollars) Sales Cost of goods sold Selling, general, and administrative expenses Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Federal and state income taxes (40%) Net income $1,607,500 1,392,500 145,000 S 70,000 24,500 S 45,500 18.200 27,300 Morton Ratio Current assets/Current liabilities Days sales outstanding Sales/Inventory Sales/Fixed assets Sales/Total assets Net income/Sales Net income/Total assets Net income/Common equity Total debt Total assets Industry Average 2.0 35.0 days 6.7 12.1 3.0 1.2% 3.6% 9.0% 60.0% "Calculation is based on a 365-day year. 3-14) The liman