Ratio Analysis: The Corrigan Corporation's 2013 and 2014 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 compares 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 the changes in these two accounts.

Corrigan Corporation: Balance Sheets as of December 31

Â	2014	2013
Cash	72000	65000
Accounts receivable	439000	328000
Inventories	894000	813000
     Total current assets	1405000	1206000
Land and building	238000	271000
Machinery	132000	133000
Other fixed assets	61000	57000
Total assets	1836000	1667000
Accounts payable	80000	72708
Accrued liabilities	45010	40880
Notes payable	476990	457912
     Total current liabilities	602000	571500
Long-term debt	404290	258898
Common stock	575000	575000
Retained earnings	254710	216602
Total liabilities and equity	1836000	1667000

Corrigan Corporation: Income Statements for Years Ending December 31

Â	2014	2013
Sales	4240000	3635000
Cost of goods sold	3680000	2980000
     Gross operating profit	560000	655000
General administrative and selling expenses	303320	297550
Depreciation	159000	154500
     EBIT	97680	202950
Interest	67000	43000
     Earnings before taxes (EBT)	30680	159950
Taxes (40%)	12272	63980
Net income	18408	95970

Per Share Data

Â	2014	2013
EPS	0.80	4.17
Cash dividends	1.10	0.95
Market price (average)	12.34	23.57
P/E ratio	   15.42x	   5.65x
Number of shares outstanding	23000	23000

Industry Financial Ratios

Â	2014
Current ratio	2.7x
Inventory turnover^b	7.0x
Days sales outstanding^c	32.0 days
Fixed assets turnover^b	13.0x
Total assets turnover^b	2.6x
Return on assets	9.1%
Return on equity	18.2%
Return on invested capital	14.5%
Profit margin	3.5%
Debt-to-capital ratio	50.0%
P/E ratio	6.0x

^a Industry average ratios have been constant for the past 4 years.

^b Based on year-end balance sheet figures.

^c Calculation is based on a 365-day year