Note: The values shown are not the real answers. This is just an example to guide you in your analysis.

1. Compute the debt ratios using the data below. Corrigan Corporation is a manufacturing plant that produces furniture. Fill out the table and briefly assess how the company changed. Corrigan Corporation: Balance Sheets as of December 31 2016 2015 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 payable Accrued liabilities Notes payable Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and equity $ 80,000 45,010 476,990 $ 602,000 404,290 575,000 254,710 $1,836,000 $ 72,708 40,880 457,912 $ 571,500 258,898 575,000 261,602 $1,667,000 Corrigan Corporation: Income Statements for Years Ending December 31 2016 2015 Sales S4,240,000 $3,635,000 Cost of goods sold 3,680,000 2,980,000 Gross operating profit S 560,000 $ 655,000 General administrative and selling expenses 303,320 297,550 Depreciation 159,000 154,500 EBIT S 97,680 $ 202,950 Interest 67,000 43,000 Earnings before taxes (EBT) S 30,680 $ 159,950 Taxes (40%) 12,272 63,980 Vet income 18,408 $ 95,970 Values Financial Ratios 2016 2015 % change Was the change (a) good or (b) bad, or (c) can't determine Bad since they are getting lower financial leverage Debt ratio? 48% 49% -2% Times Interest Earned Ratio 2. From the above example, answer the following questions: a. Is the company in a good debt position? Briefly explain your answer. b. If you are the financial manager of the company, what would you recommend to the board of directors for 2017? increase their debt ratio to 55%, decrease the debt ratio to 50%, or maintain the current level of debt ratio. Defend your