Finance Homework

Only the Questions in Red need to be answered

P5. Following are selected financial data in thousands of dollars for the Hunter Corporation.

2012	2011
Current Assets	$500	$400
Fixed Assets, Net	$700	$600
Total Assets	$1,200	$1,000
Current Liabilities	$300	$200
Long-Term Debt	$200	$200
Common Equity	$700	$600
Total Liabilities and equity	$1,200	$1,000
Net sales	$1,500	$1,200
Total Expense	($1,390)	($1,100)
Net Income	$110	$100

a. Calculate Hunter’s rate of return on total assets in 2012 and in 2011. Did the ratio improve or worsen?

Return on assets % = Net Income/Total Assets

For 2011, 100,000/1,000,000 = 0.1 or 10%

For 2012, 110,000/1,200,000 = 0.092 or 9.2%

The ratio worsened.

b. Diagram the expanded Du Point system for Hunter for 2012. Insert the appropriate dollar amounts wherever possible.

c. Use the Du Pont system to calculate the return on assets for the two years, and determine why they changed.

P6. Following are financial statements for the Genatron Manufacturing Corporation for 2012 and 2011.

BALANCE SHEET	2012	2011
ASSETS
Cash	$40,000	$50,000
Accts. Receivable	$260,000	$200,000
Inventory	$500,000	$450,000
Total Current assets	$800,000	$700,000
Fixed Assets, Net	$400,000	$300,000
Total Assets	$1,200,000	$1,000,000
LIABILITIES AND EQUITY
Accts. Payable	$170,000	$130,000
Bank Loan	$90,000	$90,000
Accruals	$70,000	$50,000
Total Current Liabilities	$330,000	$270,000
Long-term debt, 12%	$400,000	$300,000
Common Stock, $10 par	$300,000	$300,000
Capital Surplus	$50,000	$50,000
Retained earnings	$120,000	$80,000
Total Liabilities &equity	$1,200,000	$1,000,000

INCOME STATEMENT	2012	2011
Net Sales	$1,500,000	$1,300,000
Cost of Goods Sold	$900,000	$780,000

INCOME STATEMENT	2012	2011
Gross profit	$600,000	$520,000
Expenses: General and Administrative	$150,000	$150,000
Marketing	$150,000	$150,000
Depreciation	$53,000	$40,000
Interest	$57,000	$45,000
Earnings before taxes	$190,000	$155,000
Income Taxes	$76,000	$62,000
Net Income	$114,000	$93,000

a. Apply Du Pont analysis to both the 2012 and 2011 financial statements’ data.

b. Explain how financial performance differed between 2012 and 2011.

 

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