118 Part 2 Fundamental Concepts in Financial Management
Per-Share Data
2008 2007
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 23,000Industry Financial Ratiosa
2008
Current ratio 2.7#
Inventory turnoverb 7.0#
Days sales outstandingc 32 days
Fixed assets turnoverb 13.0#
Total assets turnoverb 2.6#
Return on assets 9.1%
Return on equity 18.2%
Debt ratio 50.0%
Profit margin 3.5%
P/E ratio 6.0#
Price/cash flow ratio 3.5#
aIndustry average ratios have been constant for the past 4 years.
bBased on year-end balance sheet figures.
cCalculation is based on a 365-day year.Corrigan Corporation: Income Statements for Years Ending December 31
2008 2007
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 administrative and selling expenses 236,320 213,550
Depreciation 159,000 154,500
Miscellaneous 134,000 127,000
Earnings before taxes (EBT) $ 30,680 $ 159,950
Taxes (40%) 12,272 63,980
Net income $ 18,408 $ 95,970FINANCIAL STATEMENT ANALYSIS Part I of this case, presented in Chapter 3, discussed the situation of
D’Leon Inc., a regional snack foods producer, after an expansion program. D’Leon had increased plant capac-
ity and undertaken a major marketing campaign in an attempt to “go national.” Thus far, sales have not been
up to the forecasted level, costs have been higher than were projected, and a large loss occurred in 2008 rather
than the expected profit. As a result, its managers, directors, and investors are concerned about the firm’s
survival.
Donna Jamison was brought in as assistant to Fred Campo, D’Leon’s chairman, who had the task of getting
the company back into a sound financial position. D’Leon’s 2007 and 2008 balance sheets and income statements,
together with projections for 2009, are given in Tables IC4-1 and IC4-2. In addition, Table IC4-3 gives the4-254-25
I N T E G R AT E D C A S E
D’LEON INC., PART II