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Finance Homework

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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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Smartbrains (326)
Rice University
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