question a-e

4-25 RATIO ANALYSIS The Corrigan Corporation's 2014 and 2015 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. 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? & What do you think would happen to its ratios if the company in 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. Corrigan Corporation: Balance Sheets as of December 31 2015 2014 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 Total assets $1,836,000 $1,667,000 57.000 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 457912 5571,500 258.898 575,000 261,602 51.667.000 Corrigan Corporation: Income Statements for Years Ending December 31 2015 2014 Sales Cost of goods sold Gross operating profit General administrative and selling expenses Depreciation EBIT $4.240,000 3.680.000 $ 560.000 303,320 159.000 $ 97680 $3,635,000 2.980.000 $ 655.000 297,550 154.500 $ 202,950 Corrigan Corporation: Income Statements for Years Ending December 31 2015 2014 Interest 67,000 43,000 Earnings before taxes (EBT) $ 30,680 $ 159,950 Taxes (409) 12,272 63,980 Net income $ 18,408 $ 95,970 Per-Share Data 2015 EPS Cash dividends Market price (average) P/E ratio Number of shares outstanding $ 0.80 $ 1.10 $12.34 15.42% 23,000 2014 $ 4.17 $ 0.95 $23.57 5.65x 23,000 Industry Financial Ratios 2015 2.7x 7.0x 32.0 days 13.0x 2.6x 9.1% Current ratio Inventory turnover Days sales outstanding Fixed assets turnover Total assets turnover Return on assets Return on equity Return on invested capital Profit margin Debt-to-capital ratio P/E ratio Industry average ratios have been constant for the past 4 years. Based on year-end balance sheet figures. Calculation is based on a 365-day year. 18.2% 14.5% 3.5% 50.0% 6.0x