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.