This assignment covers, Analysis of Financial Statement. You will need to know
1) how to calculate different elements of the income statement and balance sheet;
2) calculate the Addition to Retained Earnings and carry this amount over to the balance sheet;
3) calculate all the ratios given and
4) calculate Return on Assets (ROA, also known as the DuPont System) and Return on Equity (ROE, also known as the Modified DuPont System)
DuPont System -
The following data are from Saratoga Farms, Inc, 2014 financial statement:
|
Sales
|
$2,000,000
|
|
Net Income
|
$200,000
|
|
Total Assets
|
$1,000,000
|
|
Debt to TA Ratio
|
60%
|
1. Construct and solve the DuPont and Modified DuPont equations for Saratoga Farms.
2. What would be the impact on ROE if the debt to TA ratio were 80%?
3. What would be the impact on ROE if the debt to TA were 20%?
Industry Comparisons -
Carrie White, the new financial analyst of Golden Products, Inc., has been given the task of reviewing the performance of her company over three recent years against the following industry information (figures in $000):
|
Year
|
Net Income
|
Current Assets
|
Current Liabilities
|
Total Assets
|
Total Liabilities
|
Sales
|
|
2012
|
$400
|
$500
|
$530
|
$3,800
|
$2,600
|
$4,000
|
|
2013
|
425
|
520
|
510
|
3,900
|
2,500
|
4,500
|
|
2014
|
440
|
550
|
510
|
4,000
|
2,400
|
4,700
|
The industry averages are:
|
NI/Sale
|
Current Ratio
|
Total Asset Turnover
|
|
0.0942
|
1.13
|
2.00
|
Complete the table below, building formulas for Profit Margin, Current Ratio and TAT for each year, one for the three-year average of each ratio, and enter the industry ratios. Then answer this question: Should Carrie be critical of her company's performance?
|
Year
|
Profit Margin
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Current Ratio
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Total Asset Turnover
|
|
2012
|
|
|
|
|
2013
|
|
|
|
|
2014
|
|
|
|
|
3-yr Average
|
|
|
|
|
Industry Ratios
|
|
|
|
Attachment:- Assignment.rar