6. Following are financial statements for the Genatron Manufacturing Corporation

Question

6. Following are financial statements for the Genatron Manufacturing
Corporation for 2012 and 2011.
GENATRON MANUFACTURING CORPORATION
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 150,000 130,000
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.

Explanation / Answer

Return on Equity = Net Income/Shareholder's Equity

a)
2012     
ROE = 14,000/1,200,000 = 9.5%

2011   
ROE = 93,000/1,000,000 = 9.3%

b) Compnany with high ROE more likely to be one that is capable of generating cash internally. So in 2012 company did slightly better than 2011.

Related Questions

Navigate

• Browse (All)
• Browse 6
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.