Ratio Analysis

Ratio analysis.

The Corrigan Corporation’s 2004 and 2005 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 debit management position, and determine how it compares with peers and how its debt management has changed over time

D. Asses Corrigan’s profitability ratios, and determine how they compare with peers and how the profitability position has changed over time.

E. Assess Corrigan’s market value ratios, and determine how their 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 extended Du Pont 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 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

| |2005 |2004 |

|Cash |$72,00 |$65,00 |

|Accounts receivable |439,000 |328,000 |

|Inventories |894,000 |813,000 |

|Total current assets...