Chem-Med Company Ratio Analysis

Solution Case # 02:

Question # 1:

Year 2005 2006 2007 2008 2009

Sales 3051 3814 5340 7475 10466

Sales Growth 25% 40% 40% 40%

Sales growth for the year 2006 is 25% where as the sales growth projected for the year 2007, 2008 and 2009 is 40%.

Question # 02:

Year 2005 2006 2007 2008 2009

Income 766 1150 1609 1943 2903

Income Growth 50.13% 39.91% 20.76% 49.41%

Income growth in the year 2006 was 50.13% which is higher than the growth of sales in 2006 whereas, the income growth in years 2007, 2008 and 2009 is 39.91%, 20.76% and 49.41% respectively. In 2007 the income is growing at the same rate as that of sales, in 2008 the income is growing at lower rate than sales whereas the income in 2009 is growing at faster rate than the sales in 2009. In 2007 income statement 500 is expense as extraordinary expense so this should be treated below the line and should not be deducted from the income from continuing operation.

Question # 03:

Year 2006 2007 2008 2009

Current Assets 1720 2255 3417 3261

Current Liabilities 593 830 1162 1647

Current Ratio Chem-Med 2.90 2.72 2.94 1.98

Median Company 2.40

Pharmacia Current Ratio 2.80

Industry Average 2.70

Chem-Med's current ratio is higher than that of Pharmacia in 2006. Company's current ratio is still higher than the industry average and the company's current ratio is in safe zone. In 2009 the company current ratio is still positive but it's lower than the safe zone as mentioned as 2.25 to be adequately safe. So the company's current ratio in 2009 is 1.98.

Question # 04:

Year 2006 2007 2008 2009

Debt 614 857 1,212 1,664

Asset 4,491 6,343 8,641 11,995

Debt