Cyberproblem

Using Ratio Analysis as a Tool - Brady Corporation

The chapter demonstrates the various ways that managers and investors use financial statements. The following cyberproblem addresses the financial statement analysis of Brady Corporation. Use the company's website at http://www.bradycorp.com to navigate through this cyberproblem.

Brady Corporation is a leader in identification, safety, and material solutions. In 1998, the firm was hit hard by faltering foreign markets, so it embarked upon an aggressive campaign to redesign its cost structure. The firm believes this will help it to enhance future stockholder value. Brady follows the concept of Shareholder Value Enhancement (SVE), which is improved through increased sales, cost control, and effective use and control of assets.

1. Review Brady Corporation's Consolidated Statements of Income. Its 2001 annual report is found at http://media.corporate-ir.net/media_files/nys/brc/reports/2001AR/index.html. Calculate and interpret Brady's gross margin (Net Sales-Cost of Goods Sold)/Net Sales) for the years 1999, 2000, and 2001. What conclusions, if any, can you draw from analyzing these gross margins?
   
   
2. Continuing on Brady's consolidated statements of income. Calculate and interpret net profit margin for the years 1999, 2000, and 2001. Note: Net profit margin = (Net Income/Net Sales).
   
   
3. On Brady's Income Statement, calculate Brady's TIE ratio for 1999, 2000, and 2001 and interpret your results.
   
   
4. Looking at Brady's Balance Sheets for the 2000 and 2001, calculate the current ratio and comment on any changes in Brady's liquidity position.
   
   
5. Using both the income statements and balance sheets, calculate Brady's total assets turnover for 2000 and 2001, and interpret your results.
   
   
6. Now, turn your attention to the "2001 Highlights", which can be found on the first page of the annual report. How are the company's sales divided between business segments and by region?
   
   
7. Based upon the distribution of the company's sales, what sort of world economic factors might the company be subject to?
   
   
8. Go to http://finance.yahoo.com and obtain a quote for the Brady Corporation (you may need to use the Symbol lookup) and look at the company's "Profile". How has the company's stock performed over the last 52 weeks? How has the stock performed relative to the S&P 500 over the last 52 weeks?
   
   
9. Next, click on the "Ratio Comparisons" link found on the left side of the page. How does Brady Corporation's ratios compare to other companies in its industry, sector, and in the S&P 500?