Case Study
I. Case Introduction Before Chrysler merged to become DaimlerChrysler AG, they were presented with a takeover bid of $55 per share by MGM billionaire Kirk Kerkorian and former Chrysler chairman Lee Iacocca. Kirk Kerkorian was a stockholder in Chrysler and an experienced takeover financier who apparently found Chrysler to be a good buy. Chrysler rejected the offer, however, stating that the firm was not for sale. Further, many Wall Street experts felt that Kerkorian could not come up with the $20 billion necessary to complete the deal.
After Chrysler rejected Kirk Kerkorian’s bid of $55 per share, Kerkorian decided to have his people repeat the analysis of the firm’s financial performance over the two most recent years to determine if he could increase his bid on this friendly takeover attempt. To measure the financial performance of Chrysler over the past two years, key financial ratios will have to be computed and compared with industry averages. To help in this endeavor, Chrysler’s financial statements are also presented.
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II. Statement of the Problem
Specifically, this case study aims to respond to the following questions:
1) Compute Chrysler’s financial ratios for the past two years. 2) Compare these ratios to the Industry’s average. Comment on Chrysler’s strengths and weaknesses by ratio category. 3) Should Kerkorian have pursued the purchase of Chrysler? 4) If Kerkorian did not want to takeover Chrysler, what other reasons might he have had for trying to convince other people that Chrysler was a takeover candidate?
III. Objective The objective of this study is to understand and analyze the financial statements, to illustrate the formula in obtaining the financial ratios and to evaluate its meaning. In this study, we portray the financial information of Chrysler Corporation and demonstrate the following financial
After Chrysler rejected Kirk Kerkorian’s bid of $55 per share, Kerkorian decided to have his people repeat the analysis of the firm’s financial performance over the two most recent years to determine if he could increase his bid on this friendly takeover attempt. To measure the financial performance of Chrysler over the past two years, key financial ratios will have to be computed and compared with industry averages. To help in this endeavor, Chrysler’s financial statements are also presented.
[pic]
[pic]
[pic]
[pic]
[pic]
II. Statement of the Problem
Specifically, this case study aims to respond to the following questions:
1) Compute Chrysler’s financial ratios for the past two years. 2) Compare these ratios to the Industry’s average. Comment on Chrysler’s strengths and weaknesses by ratio category. 3) Should Kerkorian have pursued the purchase of Chrysler? 4) If Kerkorian did not want to takeover Chrysler, what other reasons might he have had for trying to convince other people that Chrysler was a takeover candidate?
III. Objective The objective of this study is to understand and analyze the financial statements, to illustrate the formula in obtaining the financial ratios and to evaluate its meaning. In this study, we portray the financial information of Chrysler Corporation and demonstrate the following financial