Submitted by: Submitted by jasont9999
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Words: 332
Pages: 2
Category: Business and Industry
Date Submitted: 09/15/2015 06:47 PM
Case 2: Chem Med Company
1)
2010
Sales Growth = ($3, 814000 – 3,051000)/ 3, 05100 = 25%
2011
($5,340,000 - 3,814,000)/ 3,814,000 = 40%
2012
($7,475,000 – 5,340,000)/ 5,340,000 = 40%
2013
($10,466,000 – 7,475,000)/ 7,475,000 = 40%
2)
2007
Net income growth = (Net income this year - Net income last year) / Net Income last year
= ($1,150,000 – 766,000)/ 766,000 = 50%
2008
($1,609,000 – 1,150,000)/ 1,150,000 = 40%
2009
($1,943,000 – 1,609,000)/ 1,609,000 = 21%
2010
($2,903,000 – 1,943,000)/ 1,943,000 = 49%
The projected net income is growing slower than projected sales in 2009. In 2007, 2008, and
2010 the projected net income is growing faster than projected sales. An adjustment should be
made since the income in 2007 was higher due to extraordinary gains that is non-recurring. The
net income for 2007 should be reduced using the after tax amount.
3.
2007
Chem-Med's current ratio = Current assets / Current liabilities = $1,720 / $ 593= 2.90
2010
$3,261/ $ 1,647= 1.98
Chem-Med’s current ratio was a higher 2.90 compared to Pharmacia’s current ratio of 2.8. The
industry average was 2.4. The 2007 current ratio for Chem-Med was higher compared to the 1.98
value in 2010. This value does not meet the ratio required to maintain for the loan agreement.
4.
2007
Chem-Med's total debt to assets ratio = Total liabilities / Total assets
=$ 614,000 – 4,491,000 = 0.14
2008
$857,000 – 6,343,000 = 0.1398
2009
$1,212,000 – 8,641,000 = 0.14
2010
$1,664,000 – 11,995,000 = 0.139
The trend evident during the four-year period is that the ratio almost remained the same year
after year implying that the debt is being maintained efficiently. Chem Med has a lower amount
of debt than the average company in the industry.