财务报告与分析三友会计名著译丛第08章习题答案.docx

Chapter 8ProfitabilityPROBLEMSPROBLEM 8-1Net Profit Margin = 200420035.00%4.00%Return on Assets = 2004200322.83%20.00%Total Asset Turnover = 200420034.57 times5.00 timesper yearper year= Return on Common Equity = 2004200330.88%25.00%Ahl Enterprise has had a substantial rise in profit to sales. This is somewhat tempered by a reduction in asset turnover. Given a slight rise in common equity, there is a substantial rise in return on common equity.PROBLEM 8-2a.20042003SalesCost of goods soldGross profitSelling expenseGeneral expenseOperating incomeIncome taxNet income100.0% 60.7 39.3 14.6 10.0 14.7 5.9 8.8%100.0% 60.8 39.2 20.0 8.3 10.9 4.2 6.7%b.Starr Canning has had a sharp decrease in selling expense coupled with only a modest rise in general expenses giving an overall rise in the net profit margin.PROBLEM 8-3Earnings Before interest and tax$245,000Interest (750,000 x 6%) 45,000Earnings before tax$200,000Tax 80,000Net income$120,000Preferred dividends 15,000Income available to common$105,000a.b.c. d. = 5.44 times per yearPROBLEM 8-4Vent Molded PlasticsVent Molded PlasticsSalesSales returnsCost of goods sold Selling expense General expense Other income Other expense Income tax Net income101.0% 7.0 72.1 9.4 7.0 .4 1.5 4.8 5.6%100.3% .3 67.1 10.1 7.9 .4 1.3 5.5 8.5%Sales returns are higher than the industry. Cost of sales is much higher, offset some by lower operating expenses. Other expense (perhaps interest) is somewhat higher. Lower taxes are perhaps caused by lower income. Overall profit is less, primarily due to cost of sales.PROBLEM 8-5a.2004 sales were 122.72% of those in 2003.b.2004 net earnings were 100.80% of those in 2003.c.1.Net Profit Margin = 200420032.Return on Assets = 200420033.Total Asset Turnover = 200420034.DuPont Analysis: Return on = Net Profit x Total Asset Assets Margin Turnover 2004 10.42* = 9.39% x 1.11 2003 12.72* = 11.56% x 1.10*Rounded causes the difference from the 10.38% and 12.67% computed in part 2.5.20042003Operating income Net sales Less: Cost of product sold Research and develop- ment expenses General and sellingOperating income $1,589,150 651,390 135,314 526,680$ 275,766$1,294,966 466,250 113,100 446,110$ 269,506Operating Income Margin = 200420036.Return on Operating Assets = 20042003= 19.53%= 23.24%7.Operating Asset Turnover = 20042003= 1.13 times= 1.12 times per year per year8.DuPont Analysis: Return on = Net Profit x Total Asset Assets Margin Turnover 2004 19.61%* = 17.35% x 1.13 2003 23.31%* = 20.81% x 1.12*Rounding causes the difference from the 19.53% and 23.24% computed in part 6.9.20042003Net earnings before minority shareInterest expenseEarnings before taxProvision for income taxTax rate1 tax rate(interest expense x (1 tax rate)Net earnings before minority share + (interest expense) x (1 tax rate)Long-term debt + equityReturn on investment$ 149,260 18,768 263,762 114,502 43.4% 56.6% 10,623 159,883 1,019,420 15.7%$ 149,760 11,522 271,500 121,740 44.8% 55.2% 6,360 156,120 933,232 16.7%10.Return on Common Equity = 20042003= 17.06%= 19.03%d.Profits in relation to sales, assets, and equity have all declined. Turnover has remained stable. Overall, although absolute profits have increased in 2004, compared with 2003, the profitability ratios show a decline.PROBLEM 8-6a.1.Net Profit Margin = 200420032002= 6.07%= 3.96%= 3.76%2.Return on Assets = 200420032002= 6.04%= 4.21%= 3.82%3.Total Asset Turnover = 200420032002= 1.11 times per year= 1.07 times per year= 1.02 times per year4.DuPont AnalysisReturn onAssets=Net Profit MarginxTotal AssetTurnover2004: 6.74%2003: 4.24%2002: 3.84%=6.07% 3.96%*3.76%*xxx1.11 times1.07 times1.02 times*Rounding difference from the 4.21% and 3.82% computed in 2.5.Operating Income Margin = 200420032002(2) Net salesLess: Material and manufacturing costs of products soldResearch and developmentGeneral and selling(1) Operating income(1) Dividend by (20)$1,600,000 740,000 90,000 600,000 1,430,000 170,000 10.63%$1,300,000 624,000 78,000 500,500 1,202,500 97,500 7.50%$1,200,000 576,000 71,400 465,000 1,112,400 87,600 7.30%6.Return on Operating Assets = 200420032002 Operating Income_Average Operating Income$ 170,000$1,390,20012.23%$ 97,500$1,160,0008.41%$ 87,000$1,090,0007.98%7.Operating Asset Turnover = 200420032002 Net Sales_Average Operating Assets$1,600,000$1,390,2001.15 times$1,300,000$1,160,0001.12 times$1,200,000$1,090,0001.10 times8.DuPont Analysis with operating ratiosReturn onAssets=Net Profit MarginxTotal AssetTurnover2004: 12.22%*2003: 8.40%*2002: 8.03%=10.63% 7.50% 7.30%xxx1.151.121.10*Rounding difference from the 12.23%, 8.41%, and 8.04% computed in 6.9.Estimated tax rate:200420032002(1) Provision for income taxes(2) Earnings before income taxes and Minority equity(1) divided by (2)1 tax rate(3) Interest expense x (1-tax rate)$19,000 x 6.00%$18,200 x 59.00%$17,040 x 58.00%(4) Earnings before minority equity(3) plus (4) (A)(5) Total long-term debt(6) Total stockholders equity(5) plus (6) (B)(A) divided by (B)$ 62,049$ 159,10039.00%61.00%11,59097,051108,641211,100811,2001,022,30010.63%$ 35,731$ 87,15041.00%59.00%10,73851,41962,157212,800790,1001,002,9006.20%$ 32,659$ 77,76042.00%58.00%9,88345,10154,984214,000770,000984,0005.59%10.200420032002Net income etc.Average total equity$ 86,851$811,200$ 42,919$790,100$ 37,001$770,000b.All ratios computed indicate a significant improvement I profitability.PROBLEM 8-7a.1.200420032002$ 171,115$1,002,100= 17.08%$163,497$980,500= 16.67%$143,990$900,000= 16.00%2.200420032002$171,115$839,000= 20.40%$163,497$770,000= 21.23%$143,990$765,000= 18.82%3.200420032002$1,002,100$ 839,000= 1.19 times per year$980,500$770,000= 1.27 times per year$900,000$765,000= 1.18 times per year4.DuPont AnalysisReturn onAssets=Operating IncomeMarginxTotal AssetTurnover2004: 20.88%*2003: 21.17%*2002: 18.88%*=17.08%16.67%16.00%xxx1.19 times per year1.27 times per year1.18 times per year*Rounding difference from the 20.40%, 21.23%, and 18.82% computed in 2.5.Estimated tax rate:200420032002(1) Provision for income taxes(2) Earnings before income taxes tax rate (1) divided by (2) 1 tax rate(3) Interest expense x (1-tax rate) $14,620 x 59.50% $12,100 x 59.00% $11,250 x 57.70%(4) Net earnings (3) plus (4) (A)(5) Average long-term debt(6) Average shareholders equity (5) plus (6) (B)(A) divided by (B)$116,473$287,58840.50%59.50%8,699171,115179,814120,000406,000526,00034.19%$113,616$277,11341.00%59.00%7,139163,497170,636112,000369,500481,50035.44%$105,560$249,55042.30%57.70%6,491143,990150,481101,000342,000443,00033.97%6.200420032002Net earningsAverage total equity$171,115$406,000$163,497$369,500$143,990$342,0007.200420032002$1,002,100$ 302,500= 3.31$980,500$281,000= 3.49$900,000$173,000= 5.20b.The ratios computed indicate a very profitable firm. Most ratios indicate A very slight reduction in profitability in 2003.Sales to fixed assets has declined materially, but this is the only ratio for which the trend appears to be negative.PROBLEM 8-8a.1.200420032002$20,070-$8,028 $297,580= 4.05%$16,660-$6,830 $256,360= 3.83%$15,380-$6,229 $242,150= 3.78%2.200420032002$20,070-$8,028 $145,760= 8.26%$16,660-$6,830 $137,000= 7.18%$15,380-$6,229 $136,000= 6.73%3.200420032002$297,580$145,760= 2.04 times per year$256,360$137,000= 1.87 times per year$242,150$136,000= 1.78 times per year4.DuPont AnalysisReturn onAssets=Operating IncomeMarginxTotal AssetTurnover2004: 8.26%2003: 7.16%*2002: 6.73%=4.05%3.83%3.78%xxx2.04 times1.87 times1.78 times*Rounding difference from the 7.18% computed in 2.5.200420032002$ 26,380$297,580= 8.86%$ 22,860$256,360= 8.92%$ 20,180$242,150= 8.33%6.200420032002 $26,380_$89,800+$45,850= 19.45%$ 22,860_$84,500+$40,300= 28.32%$ 20,180_$83,100+$39,800= 16.42%7.200420032002= 2.19 times per year= 2.05 times per year= 1.97 times per year8.DuPont Analysis with Operating RatiosReturn onAssets=Operating IncomeMarginxTotal AssetTurnover2004: 19.40%*2003: 18.29%*2002: 16.41%*=8.86%8.92%8.33%xxx2.19 times2.05 times1.97 times*Rounding difference from the 19.45%, 18.32%, and 16.42% computed in 6.9.200420032002$ 91,580$297,580= 30.77%$ 80,060$256,360= 31.23%$ 76,180$242,150= 31.46%b.Net profit margin and total asset turnover both improved. This resulted in a substantial improvement to return on assets.Operating income margin declined slightly in 2003 after a substantial improvement in 2002. Operating asset turnover improved each year. The result of the improvement in operating income margin and operating asset turnover was a substantial improvement in return on operating assets.Gross profit margin declined slightly each year.Overall profitability improved substantially over the three-year period.PROBLEM 8-9a.1.200420032002(A)(B)$ 2,100,000$ 2,600,000 7,000,000 100,000 10,000,000$19,700,000$ 1,950,000$ 2,300,000 6,200,000 100,000 9,000,000$17,600,000$ 1,700,000$ 2,200,000 5,800,000 100,000 8,300,000$16,400,0002.Estimated tax rate:200420032002(1) Provision for income taxes(2) Income before tax tax rate = (1) divided by (2) 1 tax rate(3) Interest expense x (1-tax rate) $80,000 x 58.33% $600,000 x 57.35% $550,000 x 61.82%(4) Net income (3) plus (4) (A) Long-term debt Preferred stock Common equity (B)(A) divided by (B)$ 1,500,000 3,600,00041.67%58.33%$ 466,640$ 2,100,000$ 2,566,640$ 7,000,000100,000 10,000,000$17,100,00015.01%$ 1,450,0003,400,00042.65%57.35%$ 344,100$ 1,950,000$ 2,294,100$ 6,200,000100,000 9,000,000$15,300,00014.99%$ 1,050,0002,750,00038.18%61.82%$ 340,000$ 1,700,000$ 2,040,010$ 5,800,000100,000 8,300,000$14,200,00014.37%3.200420032002= 20.79%= 21.43%= 29.24%4.200420032002= 20.86%= 21.51%= 20.31%b.Return on assets improved in 2003 and then declined in 2004. Return on investment improved each year. Return on total equity improved and then declined. Return on common equity improved and then declined.In general, profitability has improved in 2003 over 2002 but was down slightly in 2004.c.The use of long-term debt and preferred stock both benefited profitability.Return on common equity is slightly more than return on total equity, indicating a benefit from preferred stock.Return on total equity is substantially higher than return on investment, indicating a benefit from long-term debt.PROBLEM 8-10a.Sales$120,000Gross profit (40%) 48,000Cost of goods sold (60%) 72,000Beginning inventory$ 10,000+ purchase 100,000Total available 110,000- Ending inventory ?_Cost of goods sold$ 72,000Ending inventory (110,000-72,000)$ 38,000b.If gross profit were 50%, the analysis would be as follows:Sales$120,000Gross profit (50%) 60,000Cost of goods sold (50%) 60,000Beginning inventory$ 10,000Purchases 100,000Total available$110,000- Ending inventory 50,000Cost of goods sold$ 60,000If gross profit were higher, the loss would be higher.PROBLEM 8-11NetProfitRetainedEarningsTotalStockholdersEquitya. a stock dividend is declared and paid.b. Merchandise is purchased on credit.c. Marketable securities are sold above cost.d. Accounts receivable are collected.e. A cash dividend is declared and paid.f. Treasury stock is purchased and recorded at cost.g. Treasury stock is sold above cost.h. Common stock is sold.i. A fixed asset is sold for less than book value.j. Bonds are converted into common stock.00+00000-0-0+0