Finance
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Homework1.docxHomework Assignment I
(Due by September 23, 2021)
Show your work (use of formula, etc.) in solving the problems.
Provide your answers/solutions in the answer space provided below.
Answer all questions.
Graded problems
1. Data for Cary Company and its industry average follow.
a. Calculate the indicated ratios for Cary.
|
Ratio |
|
Cary |
Industry Average |
|
Current ratio |
|
_____________ |
2.0 X |
|
Days sales outstanding |
|
_____________ |
35 days |
|
Inventory turnover |
|
_____________ |
5.6 X |
|
Total assets turnover |
|
_____________ |
3.0 X |
|
Net profit margin |
|
_____________ |
1.2% |
|
Return on assets (ROA) |
|
_____________ |
3.60% |
|
Return on equity (ROE) |
|
_____________ |
9.00% |
|
Debt ratio |
|
_____________ |
60% |
b. Construct the DuPont equation for both Cary and the industry
DuPont ROA (Cary) =
DuPont ROA (Industry) =
c. Outline Cary’s strengths and weaknesses as revealed by your analysis.
2. Use the following personal income tax table and calculate (1) tax liability, (2) average tax rate, and (3) marginal tax rate for a person who earns taxable income of $175,000 for the year.
MBA550A FALL 2021 HW1 1
Sheet1
| Balance Sheet as of Dec. 31 (Millions of Dollars) | |||
| Assets | Liabilities and Owner's Equity | ||
| 2019 | 2019 | ||
| Current Assets | Current Liabilities | ||
| Cash | 95,500 | Accts payable | 227,000 |
| A/R | 332,000 | Notes payable | 74,000 |
| Inventories | 245,500 | Other current liabilities | 95,000 |
| Total CA | 673,000 | Total CL | 396,000 |
| Net fixed assets | Long-term debt | 200,500 | |
| Net plant and equipment | 285,500 | Total Liabilities | 596,500 |
| Common Equity | 357,000 | ||
| Total Assets | 958,500 | Total Liabilities and Equity | 953,500 |
| Current ratio | 1.6994949495 | ||
| Days Sales outstanding | 66.3815606776 | ||
| Inventory turnover | 5.9551934827 | ||
| TA turnover | 1.8784559207 | ||
| NPM | 1.4829214107 | ||
| ROA | 2.7856025039 | ||
| ROE | 7.4789915966 | ||
| Debt ratio | 0.5616246499 |
Sheet2
| Income statement for the year ending December 31 | |
| 2019 | |
| Sales | 1,800,500 |
| COGS | (1,462,000) |
| Gross profit | 338,500 |
| Fixed operating expenses except depreciation | (210,000) |
| Earnings before interest, taxes, depre and amort (EBITDA) | 128,500 |
| Depreciation | (40,000) |
| EBIT (Opering income) | 88,500 |
| Interest expense | (44,000) |
| EBT (Taxable income) | 44,500 |
| Taxes (40%) | (17,800) |
| Net income | 26,700 |
Sheet3
| Ratio | Campsey | Industry Average | |
| Current ratio | 1.6994949495 | _____________ | 2.0 X |
| Days sales outstanding | 66.3815606776 | _____________ | 35 days |
| Inventory turnover | 5.9551934827 | _____________ | 5.6 X |
| Total assets turnover | 1.8784559207 | _____________ | 3.0 X |
| Net profit margin | 1.4829214107 | _____________ | 1.20% |
| Return on assets (ROA) | 2.7856025039 | _____________ | 3.60% |
| Return on equity (ROE) | 7.4789915966 | _____________ | 9.00% |
| Debt ratio | 0.5616246499 | _____________ | 60% |
20192019
Current AssetsCurrent Liabilities
Cash95,500 Accts payable227,000
A/R332,000 Notes payable74,000
Inventories245,500 Other current liabilities95,000
Total CA673,000 Total CL396,000
Net fixed assetsLong-term debt200,500
Net plant and equipment 285,500 Total Liabilities596,500
Common Equity362,000
Total Assets958,500 Total Liabilities and Equity958,500
Balance Sheet as of Dec. 31 (Millions of Dollars)
AssetsLiabilities and Owner's Equity
Sheet1
| Balance Sheet as of Dec. 31 (Millions of Dollars) | |||
| Assets | Liabilities and Owner's Equity | ||
| 2019 | 2019 | ||
| Current Assets | Current Liabilities | ||
| Cash | 95,500 | Accts payable | 227,000 |
| A/R | 332,000 | Notes payable | 74,000 |
| Inventories | 245,500 | Other current liabilities | 95,000 |
| Total CA | 673,000 | Total CL | 396,000 |
| Net fixed assets | Long-term debt | 200,500 | |
| Net plant and equipment | 285,500 | Total Liabilities | 596,500 |
| Common Equity | 362,000 | ||
| Total Assets | 958,500 | Total Liabilities and Equity | 958,500 |
| Current ratio | 1.6994949495 | ||
| Days Sales outstanding | 66.3815606776 | ||
| Inventory turnover | 5.9551934827 | ||
| TA turnover | 1.8784559207 | ||
| NPM | 1.4829214107 | ||
| ROA | 2.7856025039 | ||
| ROE | 7.3756906077 | ||
| Debt ratio | 0.5538674033 |
Sheet2
| Income statement for the year ending December 31 | |
| 2019 | |
| Sales | 1,800,500 |
| COGS | (1,462,000) |
| Gross profit | 338,500 |
| Fixed operating expenses except depreciation | (210,000) |
| Earnings before interest, taxes, depre and amort (EBITDA) | 128,500 |
| Depreciation | (40,000) |
| EBIT (Opering income) | 88,500 |
| Interest expense | (44,000) |
| EBT (Taxable income) | 44,500 |
| Taxes (40%) | (17,800) |
| Net income | 26,700 |
Sheet3
| Ratio | Campsey | Industry Average | |
| Current ratio | 1.6994949495 | _____________ | 2.0 X |
| Days sales outstanding | 66.3815606776 | _____________ | 35 days |
| Inventory turnover | 5.9551934827 | _____________ | 5.6 X |
| Total assets turnover | 1.8784559207 | _____________ | 3.0 X |
| Net profit margin | 1.4829214107 | _____________ | 1.20% |
| Return on assets (ROA) | 2.7856025039 | _____________ | 3.60% |
| Return on equity (ROE) | 7.3756906077 | _____________ | 9.00% |
| Debt ratio | 0.5538674033 | _____________ | 60% |
2019
Sales1,800,500
COGS(1,462,000)
Gross profit338,500
Fixed operating expenses except depreciation(210,000)
Earnings before interest, taxes, depre and amort (EBITDA)
128,500
Depreciation
(40,000)
EBIT (Opering income)88,500
Interest expense(44,000)
EBT (Taxable income)44,500
Taxes (40%)(17,800)
Net income26,700
Income statement for the year ending December 31
