Question

Current Ratio= 2.33 Operating Profit Margin= 2.3% Quick Ratio= 0.8488 Total Debt to Equity= 1.21 Inventory...

Current Ratio= 2.33

Operating Profit Margin= 2.3%

Quick Ratio= 0.8488

Total Debt to Equity= 1.21

Inventory Turnover= 4.12

Return on Assets= 1%

Average Collection Period= 37.79 days

Return on Equity= 2.22%

Total Assets Turnover= 2.31

TIE= 1.46

Select two of the ratios you derived in Corrigan Corporation. Without re-stating the formula itself, explain what the ratio means in terms of the corporation’s financial health. The industry norms are provided below to use as comparative information. Points will be awarded based on the clarity, succinctness and good writing skills provided for each answer.

INDUSTRY NORMS:

Current Ratio 1.2 times

Quick Ratio 1.1 times

Inventory Turnover 4.0 times

Average Collection Period 32.0 days

Total Assets Turnover 2.6 times

Operating Profit Margin 4.2%

Total Debt to Equity 10.9%

Return on Assets 15.2%

Return on Equity 3.6% I

nterest Coverage

(TIE) 8.5 times

Business   Accounting   
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Homework Answers

Answer #1

Quick Ratio

Corrigan Corporation .8488 vs Industry 1.1 times.

The ratio indicates that the company has more current liabilities compared to other companies in industry. It also indicated that liquid funds with the company is lower compared to industry standards. The company should increase the liquid funds like cash and bank for meeting the cash needs.

Average collection period -

Corrigan Corporation .8488 vs Industry 1.1 times.

The companys debtors are paying back slower than the average in the industry. The companys funds are blocked in credit sales. Company could experience cash crunch. The comapny should exercise better controls over the credit recovery.

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