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04problem 3/22/2010 7:08 12/14/2005 Chapter 4. Solution to End-of-Chapter Comprehensive/Spreadsheet Problem Problem 4-25 Corrigan Corporation's December 31 Balance Sheets Assets 2005 2004 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 Liabilities and equity Accounts 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 earnings 254,710 261,602 Total liabilities and equity $1,836,000 $1,667,000 Corrigan Corporation's December 31 Income Statements 2005 2004 Sales $4,240,000 $3,635,000 Cost of goods sold 3,680,000 2,980,000 Gross operating profit $560,000 $655,000 General admin. and selling epenses 236,320 213,550 Depreciation 159,000 154,500 Miscellaneous 134,000 127,000 EBT $30,680 $159,950 Taxes (40%) 12,272 63,980 Net income $18,408 $95,970 Per-Share Data 2005 2004 EPS $0.80 $4.17 Cash dividends $1.10 $0.95 Market price (average) $12.34 $23.57 P/E ratio 15.4 5.65 Number of shares outstanding 23,000 23,000 Once we have this information set, we can calculate the necessary ratios for this analysis. Ratio Analysis 2005 2004 Liquidity Current ratio 2.33 2.11 2.7 4.74 4.47 7.0 37.79 32.94 32 9.84 7.89 13.0 2.31 2.18 2.6 Profitability Return on assets 1.00% 5.76% 9.1% Return on equity 2.22% 11.47% 18.2% Profit margin on sales 0.43% 2.64% 3.5% Debt Management Debt ratio 54.81% 49.81% 50.0% P/E ratio 15.43 5.65 6.0 Price/cash flow ratio 1.60 2.16 3.5 Industry Avg a Asset Management
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