Please the following four questions CHRYSLER RATIO ANALYSIS . Questions Questions 1. 1. Compute Chrysler's financial ratios for the past two years. 2. 2. Compare these ratios to the industry's average. Comment on Chrysler's strengths and weaknesses by ratio category. 3. 3. Should Kerkorian have pursued the purchase of Chrysler? 4. 4. If Kerkorian did not want to takeover Chrysler, what other reasons might he have had for trying to convince other people that Chrysler was a takeover candidate?

Group Case #1 (Assigned during Week 2 and Due at end of Week 3) Chrysler Ratio Analysis Before Chysler merged to become DaimlerChrysler AG, they were presented with a takeover bid of $55 per share by MGM billionaire Kirk Kerkorian and former Chrysler chairman Lee Iacocca. Kirk Kerkorian was a stockholder in Chrysler and an experienced takeover financier who apparently found Chrysler to be a good buy. Chrysler rejected the offer, however, stating that the firm was not for sale. Further, many Wall Street experts felt that Kerkorian could not come up with the $20 billion necessary to complete the deal. After Chrysler rejected Kirk Kerkorian's bid of $55 per share, Kerkorian decided to have his people repeat the analysis of the firm's financial performance over the two most recent years to determine if he should increase his bid in this friendly takeover attempt. To measure the financial performance of Chrysler over the past two years, key financial ratios will have to be computed and compared with industry averages. To help in this endeavor, Chrysler's financial statements are found on the following pages. Chrysler Corporation's Balance Sheetfor the year ending December 31 (in millions) Year 2 Assets Current Assets Cash and cash equivalents Marketable securities Accounts receivable Inventories Prepaid taxes Finance receivables Total Current Assets Property & equipment Less: Accumulated Depreciation Net Plant & Equipment Other Assets Special tools Intangible assets Deferred tax assets Other assets Total Assets Liabilities Current Liabilities Accounts payable Short-term debt Accrued liabilities Other payments Year 1 $ 5,543 $ 2,582 $ 2,003 $ 4,448 $ 985 $13,623 $29,184 $20,468 $ 7,873 $12,595 $ 5,145 $ 3,226 $ 1,695 $ 3,356 $ 1,330 $12,433 $27,185 $18,281 $ 7,208 $11,073 $ 3,566 $ 2,082 $ 490 $ 5,839 $53,756 $ 3,643 $ 2,162 $ 395 $ 5,081 $49,539 $ $ $ $ $ 7,826 $ 4,645 $ 5,582 $ 811 8,290 2,674 7,032 1,661 Total Current Liabilities Long-term Liabilities Long-term debt Accrued employee benefits Other non-current liabilities Total Long-term Liabilities Total Liabilities $19,657 $18,864 $ 9,858 $ 9,217 $ 4,065 $23,140 $42,797 $ 7,650 $ 8,595 $ 3,736 $19,981 $38,845 Stockholder's Equity Preferred stock Common stock (at $1 par) Additional paid-in capital Retained earnings Treasury stock Total Shareholder's Equity $ 0 $ 408 $ 5,506 $ 6,280 ($1,235) $10,959 $ 2 $ 364 $ 5,536 $ 5,006 ($ 214) $10,694 Total Liabilities and Share. Equity $53,756 $49,539 Chrysler Corporation's Income Statement for the year ending December 31, (in millions) Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling & admin. $4,064 Pension $ 405 Nonpension post ret. $ 758 Depreciation $1,100 Amort. of tools $1,120 Total operating expenses Operating profits Less: Interest expenses Net profit before taxes Less: Taxes (40%) Net profit after taxes Year 2 $53,195 $41,304 $11,891 Year 1 $52,235 $38,032 $14,203 $ $ $ $ $ $ $ $ $ $ $ $ $3,933 $ 714 $ 834 $ 994 $ 961 7,447 4,444 995 3,449 1,380 2,069 7,436 6,767 937 5,830 2,332 3,498 Industry Average Financial ratios this year and last year Year 2 $5,056 1.78 1.55 $4,892 1.69 1.51 Activity Inventory Turnover Average Age of Inventory 7.41 .021 7.58 .021 Year 1 Liquidity Net Working Capital Current Ratio Quick Ratio (Acid Test) Average Collection Period Fixed Asset Turnover Total Asset Turnover Debt Debt Times Interest Earned Profitability Gross Profit Margin Net Profit Margin Return on Total Assets Return on Equity 22.8 1.54 .89 23.4 1.62 .91 75% 6.4 77% 7.0 24% 4.7% 4.6% 20.7% 28% 4.9% 4.7% 33.8% Questions 1. 1. Compute Chrysler's financial ratios for the past two years. 2. 2. Compare these ratios to the industry's average. Comment on Chrysler's strengths and weaknesses by ratio category. 3. 3. 4. 4. Should Kerkorian have pursued the purchase of Chrysler? If Kerkorian did not want to takeover Chrysler, what other reasons might he have had for trying to convince other people that Chrysler was a takeover candidate