Assessing Martin Manufacturing’s
CASE Current Financial Position
Terri Spiro, an experienced budget analyst at Martin Manufacturing Company, has been charged with assessing the firm’s financial performance during 2006 and its financial position at year-end 2006. To complete this assignment, she gathered the firm’s 2006 financial statements (below and on the facing page). In addition, Terri obtained the firm’s ratio values for 2004 and 2005, along with the 2006 industry average ratios (also applicable to 2004 and 2005). These are presented in the table on page 88.
a. Calculate the firm’s 2006 financial ratios, and then fill in the preceding table. (Assume a 365-day year.)
b. Analyze the firm’s current financial position from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm’s liquidity, activity, debt, profitability, and market.
A: From a cross-sectional series I summarized this based upon my findings. The company's P/E ration is very low, implying that consumers and investors and thinking that the company is doing well. According to the M/B ratio, the hope in the future success of the company is dwindling.
From a time-series analysis I summarized this. Investor confidence, although promising three years ago, has now dwindled to the point of being very unfavorable. The neglect of long-term liabilities has hurt the market value of the company, leading to fewer people interested in the future of the company.
c. Summarize the firm’s overall financial position on the basis of your findings in part b.
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