Chrysler Case

In: Business and Management

Submitted By liliasnava
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Case Studies in Finance
Case 5: Chrysler

Ratio Analysis Before Chysler merged to become DaimlerChrysler AG, they were presented with a takeover bid of $55 per share by MGM billionaire Kirk Kerkorian and former Chrysler chairman Lee Iacocca. Kirk Kerkorian was a stockholder in Chrysler and an experienced takeover financier who apparently found Chrysler to be a good buy. Chrysler rejected the offer, however, stating that the firm was not for sale. Further, many Wall Street experts felt that Kerkorian could not come up with the $20 billion necessary to complete the deal.
After Chrysler rejected Kirk Kerkorian's bid of $55 per share, Kerkorian decided to have his people repeat the analysis of the firm's financial performance over the two most recent years to determine if he should increase his bid in this friendly takeover attempt. To measure the financial performance of Chrysler over the past two years, key financial ratios will have to be computed and compared with industry averages. To help in this endeavor, Chrysler's financial statements are found on the following pages.
Chrysler Corporation's Balance Sheet for the year ending December 31 (in millions) This Last year year
Assets
Current Assets Cash and cash equivalents $ 5,543 $ 5,145 Marketable securities $ 2,582 $ 3,226 Accounts receivable $ 2,003 $ 1,695 Inventories $ 4,448 $ 3,356 Prepaid taxes $ 985 $ 1,330 Finance receivables $13,623 $12,433 Total Current Assets $29,184 $27,185
Property & equipment $20,468 $18,281
Less: Accumulated Depreciation $ 7,873 $ 7,208 Net Plant & Equipment $12,595 $11,073…...

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