Bay Area Corrugated Pipe, Inc.

Financial Analysis of BACP

Attached are the income statement and balance sheet for BACP from a recent year. Also attached are some comparative ratios from an industry trade association. After some analysis, you will notice that BACP is not very profitable on the basis of a number of measures. Your task, after confirming that BACP is, indeed, performing poorly, is to use financial ratio analysis to try and determine why BACP is performing so poorly. That analysis should lead you to some recommendations to address the problem. You may assume that the ratios you can compute for BACP are comparable to those presented for the industry. For example, asset and equity ratios are based on ending values rather than averages of beginning and ending or other intermediate numbers.

QUESTIONS: 1. Why is BACP underperforming its competitors? 2. What steps can the company take to improve its lackluster performance? ________________ Adapted with permission by Christopher B. Barry from material in Chapter 5 of Dick Levins Buy Low, Sell High, Collect Early and Pay Late, PrenticeHall, 1983.