Chem Med Case Essay

564 WordsApr 14, 20133 Pages
Case Study 2: Chem Med #1 Chem-Med’s rate of sales growth in 2007 Sales Growth = ($3, 814000 – 3, 051000)/ 3, 05100 = 25% Forecasted in 2008 ($5,340,000 - 3,814,000)/ 3,814,000 = 40% Forecasted in 2009 ($7,475,000 – 5,340,000)/ 5,340,000 = 40% Forecasted in 2010 ($10,466,000 – 7,475,000)/ 7,475,000 = 40% # 2 Chem Med’s net income growth in 2007 Net income growth = (Net income this year - Net income last year) / Net Income last year = ($1,150,000 – 766,000)/ 766,000 = 50% Forecast in 2008 ($1,609,000 – 1,150,000)/ 1,150,000 = 40% Forecast in 2009 ($1,943,000 – 1,609,000)/ 1,609,000 = 21% Forecast in 2010 ($2,903,000 – 1,943,000)/ 1,943,000 = 49% The projected net income is growing slower than projected sales in 2009. In 2007, 2008, and 2010 the projected net income is growing faster than projected sales. An adjustment should be made since the income in 2007 was higher due to extraordinary gains that are non-recurring. The net income for 2007 should be reduced using the after tax amount. # 3 Chem –Med’s current ratio for 2007 Chem-Med's current ratio = Current assets / Current liabilities = $1,720 / $ 593= 2.90 Chem-Med’s current ratio for 2010 $3,261/ $ 1,647= 1.98 Chem-Med’s current ratio was a higher 2.90 compared to Pharmacia’s current ratio of 2.8. The Industry average was 2.4. The 2007 current ratio for Chem-Med was higher compared to the 1.98 value in 2010. This value does not meet the ratio required to maintain for the loan agreement. # 4 Chem-Med’s total debt- to -assets ratio for 2007 Chem-Med's total debt to assets ratio = Total liabilities / Total assets =$ 614,000 – 4,491,000 = 0.14 Chem-Med’s total debt- to -assets ratio for 2008 $857,000 – 6,343,000 = 0.1398 Chem-Med’s total debt- to -assets ratio for 2009 $1,212,000 – 8,641,000 = 0.14 Chem-Med’s total debt- to -assets ratio for 2010 $1,664,000 – 11,995,000

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