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    Assignment 4

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    Ieyrah Rah Elisya
    This document is a group assignment submitted by five students for an introduction to finance course. It analyzes the liquidity, asset management, profitability, market value, and return on equity ratios of a company called Corgin over 2007-2008. Key findings include that Corgin's liquidity and profitability declined over this period based on current, acid-test, and net profit margins. The students also calculate Corgin's return on equity using the DuPont equation and compare it to industry averages. Lowering inventory and costs of goods sold is predicted to impact inventory turnover and quick ratios.

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    Assignment 4

    Uploaded by

    Ieyrah Rah Elisya
    69 views10 pages
    This document is a group assignment submitted by five students for an introduction to finance course. It analyzes the liquidity, asset management, profitability, market value, and return on equity ratios of a company called Corgin over 2007-2008. Key findings include that Corgin's liquidity and profitability declined over this period based on current, acid-test, and net profit margins. The students also calculate Corgin's return on equity using the DuPont equation and compare it to industry averages. Lowering inventory and costs of goods sold is predicted to impact inventory turnover and quick ratios.

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    ASSIGNMENT 4

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    This document is a group assignment submitted by five students for an introduction to finance course. It analyzes the liquidity, asset management, profitability, market value, and return on equity ratios of a company called Corgin over 2007-2008. Key findings include that Corgin's liquidity and profitability declined over this period based on current, acid-test, and net profit margins. The students also calculate Corgin's return on equity using the DuPont equation and compare it to industry averages. Lowering inventory and costs of goods sold is predicted to impact inventory turnover and quick ratios.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    69 views10 pages

    Assignment 4

    Uploaded by

    Ieyrah Rah Elisya
    This document is a group assignment submitted by five students for an introduction to finance course. It analyzes the liquidity, asset management, profitability, market value, and return on equity ratios of a company called Corgin over 2007-2008. Key findings include that Corgin's liquidity and profitability declined over this period based on current, acid-test, and net profit margins. The students also calculate Corgin's return on equity using the DuPont equation and compare it to industry averages. Lowering inventory and costs of goods sold is predicted to impact inventory turnover and quick ratios.

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    Download as docx, pdf, or txt
    of 10

    BBF 2013: INTRODUCTION TO FINANCE

    GROUP ASSIGNMENT: ASSIGNMENT 4

    PREPARED BY:
    ANDI NUR ELISYA SYAHIRA BINTI BAHRI (AIU18092007)
    NURFAZIAHASFI BINTI JUMAT (AIU18092006)
    SITI NORALINNAH BINTI JUSNEH (AIU18092008)
    MOHD TAHIR BIN AHMAD (AIU18092009)
    MUHD ISHAK SYAFIQ BIN MUHD KHIR (AIU18092010)

    PREPARED FOR:
    ASSOC. PROF. DR ABDUL RAHEEM BIN MOHAMAD YUSOF

    SUBMISSION DATE:
    08 JANUARY 2020 (WEDNESDAY)
    1. Assess Corgin’s liquidity position and determine how it compares with peers and how
    the liquidity position has changed overtime.

    (a) Current ratio

    Current asset

    Current liabilities

    2007 2008

    1,206,000 1,405,000

    571,500 602,000

    = 2.11 times = 2.33 times

    (b) Acid test ratio

    Current asset – inventory

    Current liabilities

    2007 2008

    1,206,000 – 894,000 1,405,000 – 813,000

    602,000 602,000

    = 0.68 times = 0.84 times


    (c) Average collection period

    Account receivable

    Daily credit sales / 365

    2007 2008

    328,000 439,000

    3,635,000 / 365 4,240,000

    328,000 439,000

    9958 / 90411 11616.43836

    =33.0 times = 3.8 times

    (d) Account receivable turn over

    Annual credit sales

    Account receivable

    2007 2008

    3,635,000 4,240,000

    328,000 439,000

    = 11.1 times = 9.7 times


    (e) Average turn over

    COGS

    Inventory

    2007 2008

    2,980,000 3,680,000

    813,000 894,000

    = 3.7 times = 4.11 times

    2. Assess Corgin’s asset management position and determine how it compares with
    peers and how’s its asset management afficiency has changed over time.

    (a) Total asset turnover

    Sales

    Total asset

    2007 2008

    3,635,000 4,240,000

    1,667,000 1,836,000

    = 2.2 times = 2.3 times


    (b) Fixed asset turnover

    Sales

    Net plants & equipment

    2007 2008

    4,240,000
    3,635,000
    370,000
    404,000
    = 11.4 = 8.10

    3. (a) debt ratio

    Total liabilities

    Total asset

    2007 2008

    421,290 420,898

    1,836,000 1,667,000

    = 0.22 = 0.25
    4. Assess Corrigrnt’s profitability ratios and determine how they compare with peers and
    how it is profitability position has changed over time.

    (a) Gross profit margin

    Gross profit

    Sales

    2007 2008

    655,000 560,000

    3,635,000 4,240,000

    = 0.2 = 0.13

    (b) Operating profit margin

    Net operating income or EBIT

    Sales

    2008 2007

    30,680 159,950

    4,240,000 3,635,000

    = 7.2 = 0.04
    (c) Net profit margin

    Net income

    Sales

    2008 2007

    18,408 95,970

    4,240,000 3,635,000

    = 4.3 =0.02

    (d) Operating return on asset

    EBIT

    Total asset

    2007 2008

    30,680 159,950

    1,836,000 1,667,000

    = 0.01 = 0.09
    (e) Return on equity

    Net income

    Common equity

    2008 2007

    18,408 95,970

    829,710 836,602

    = 0.02 = 0.11

    5. Assess corrigan’s market value ratio and determines how it compares with peers and
    how it has changed over time.

    (a) Price earning equity

    Market price per share

    Earning per share

    2007 2008

    15.4 5.65

    $0.80 4.17

    = 19.25 = 1.35
    (b) Market to book ratio

    Market per share

    Common share holder

    2008 2007

    15.4 6.5

    1.18 / 23,000 0.95 / 23,000

    15.4 5.65

    5.1 4.1

    = 3.0 = 1.4

    6. 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?

    Net profit x sales x 1

    Sales total asset 1 – debt ratio

    2008 2007

    18,408 x 4,240,000 x 1 95, 970 x 3,635,000 x 1

    4,240,000 1,836,000 1– 3,635,000 x 1,667,000 x 1 – 0.25


    0.22
    0.03 x 2.2 x 1.3
    4.3 x 2.3 x 0.78
    = 0.858
    = 77,142
    7. What do you think would happen to its ratios if the company intitiated cost-cutting
    measures that allowed it hold lower of inventory and substantially decreased the cost
    of good sold? No calculations are necessary. Think about which ratios would be
    affected by changes in these two accounts.

    In our opinion, in 2008, if the inventory decrease, the quick ratio will be change.
    However, it will depends on the current asset and current liabilities. In 2008, if the
    cost of good sold and inventory slightly down, the inventory turnover also will be
    decrease.

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