Start with the partial model in the file IFM9 Ch08 P12 Build a Model.xls from the ThomsonNOW Web site. This problem requires you to further analyze the financial data given for Cumberland Industries in the Build a Model problem. Cumberland Industries' common stock has increased in price from $14.75 to $17.25 from the end of 2005 to the end of 2006, and its shares outstanding increased from 9 to 10 million shares during that same period. Cumberland has annual lease payments of $75,000 (which are included in operating costs on the income statement), but no sinking fund payments are required. Now answer the following questions.
Using Cumberland's financial statements as given in the Chapter 7 Build a Model problem, perform a ratio analysis for 2005 and 2006. Consider its liquidity, asset management, debt management, profitability, and market value ratios.
a. Has Cumberland's liquidity position improved or worsened? Explain.
b. Has Cumberland's ability to manage its assets improved or worsened? Explain.
c. How has Cumberland's profitability changed during the last year?
d. Perform an extended Du Pont analysis for Cumberland for 2005 and 2006.
e. Perform a common size analysis. What has happened to the composition (that is, percentage in each category) of assets and liabilities?
f. Perform a percent change analysis. What does this tell you about the change in profitability and asset utilization?