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Question: The Corrigan Corporation’s 2007 and 2008

The Corrigan Corporation’s 2007 and 2008 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. e. 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? g. What do you think would happen to its ratios if the company 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.
The Corrigan Corporation’s 2007 and 2008 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.
e. 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?
g. What do you think would happen to its ratios if the company 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.

The Corrigan Corporation’s 2007 and 2008 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.
e. 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?
g. What do you think would happen to its ratios if the company 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.

The Corrigan Corporation’s 2007 and 2008 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.
e. 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?
g. What do you think would happen to its ratios if the company 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.





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Corrigan Corporation: Balance Sheets as of December 31 2008 2007 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 and notes payable $ 432,000 $ 409,500 Accrued liabilities 170,000 162,000 Total current liabilities $ 602,000 $ 571,500 Long-term debt 404,290 258,898 Common stock 575,000 575,000 Retained eamings 254,710 $1,836,000 261,602 $1,667,000 Total liabilities and equity Corrigan Corporation: Income Statements for Years Ending December 31 2008 2007 Sales $4,240,000 $3,635,000 Cost of goods sold Gross operating profit General administrative and selling expenses 3,680,000 $ 560,000 2,980,000 $ 655,000 213,550 236,320 Depreciation 159,000 154,500 Miscellaneous 134,000 $ 30,680 127,000 Eamings before taxes (EBT) $ 159,950 Taxes (40%) 12,272 $ 18,408 63,980 $ 95,970 Net income Per-Share Data 2008 2007 EPS $0.80 $4.17 Cash dividends $1.10 $0.95 Market price (average) $12.34 $23.57 P/E ratio 15.4x 5.65x Number of shares outstanding 23,000 23,000 Industry Financial Ratios 2008 Current ratio 2.7x Inventory turnover Days sales outstanding Fixed assets tumoverb Total assets turnover 7.0x 32.0 days 13.0x 2.6x Return on assets 9.1% Return on equity 18.2% Debt ratio 50.0% Profit margin 3.5% P/E ratio 6.0x Price/cash flow ratio 3.5х "Industry average ratios have been constant for the past 4 years. ÞBased on year-end Balance Sheet figures. "Calculation is based on a 365-day year.



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