Capital Corp Merchant Banking Background

The liabilities and shareholders equity side of the balance sheet benefited from a decrease in current and long-term liabilities of about $4.2 billion and an increase of $1 billion in shareholders equity, even with a $2.85 billion stock re-purchase.

The cumulative effect of the $4.3 billion decrease in current assets with only a $1.82 billion decrease in current liabilities for 2006 caused the current ratio to diminish slightly. It was after removing the inventories from its current assets the quick ratio dropped by nearly 50%.

These ratios are still within an acceptable range as nearly of all May’s inventory can quickly be converted to cash, although at a large discount, should such a short-term liquidity situation arise.

In opposition, May’s asset management seemed to have strived as collectively the company seemed to be turning over inventory more often, decreased the average collection period by around 30 days and were using their assets much more effectively. Upon closer examination it seems many of these asset management ratios are not 100% conclusive as the increase in sales due to the merger and combined changes to assets surely led to an increase in efficiency performance at the end of fiscal year 2006.