Homepage- Durham Question 1 CE Drilling ine\'s B s Balance Sheet Int Inc. Refer

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Homepage- Durham Question 1 CE Drilling ine's B s Balance Sheet Int Inc. Refer the following table. Tia's Trampolines Inc. Comparative Balance Sheet Information November 30 (millions of $) Accounts recelvable (net) Plant and equipment (net) Accounts payable Long-term notes payable Preferred shares Common shares Retained earnings 2017 2016 2015 $215 $603 $ 628 290 327 146 1,456 1,630 1,926 70 146 199 75 1,295 1,455 175 175 175 655 655 655 86 289 111 The preferred shares are $0.50, non-cumulative 80 million preferred and 320 million common shares were issued and outstanding during each year Tia's Trampollines Inc. Income Statement For Year Ended November 30 (millions of $) Net sales Cost of goods sold 2017 2016 2015 $4,220 $6,540 $6,860 2,819 4,443 4,667 $1,401 $2,097 $2,193 Gross profit Operating expenses: $326 $326 $326 422 1,278 1,474 Depreciation expense Other expenses Total operating expenses 748 1,604 1,800 Profit from operations Interest expense Income tax expense $653 $493 $393 107 117 129 94 Profit $388 $257 $182 Required

Explanation / Answer

Part 1 : Analysis showing Profitability ratios for 2017

Working Notes :-

1) All figures in the above analysis table is in Millions $.

2) Dividend on Preferred Share = Dividend per share*No. of Preferred Shares = $0.50*80 million = $40 millions

3) The ratio which exceeds the industry average is reported as Favourable (F) and the ratio which is low than Industry average is reported as unfavourable (U).

Part 2 : Calculation using 2015 as Base

The figures of 2016 and 2017 is calculated by dividing respective amount by the amount in 2015 and multiplied by 100. Net sales has decreased from 2015 to 2017 which is a Unfavourable position (U). Similarly cost of goods sold has decreased which is a favourable position (F). Accounts Receivable has increased which is an unfavourable situation and account payable has decreased which is a favourable situation.

Particulars 2017 Industry Average F/U 1) Profit Margin (388/4,220)*100 9.19% 14% U 2) Gross Profit Ratio (1,401/4,220)*100 33.20% 18% F 3) Return on Total Assets [388/(1,961+2,560)/2]*100 17.16% 20% U 4) Return on Common Shareholders Equity [(388-40)/(655+86)]*100 46.96% 32.7% F 5) Book Value per common Share (655+86)/320 $2.32 $8.63 U 6) Book Value per preferred Share (175/80) $2.19 $15.00 U 7) Earnings per share (388-40)/320 million shares $1.09 $1.79 U

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