# 1. The Robinson Company has the following current assets and current liabilities for these two years: 2014 2015

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1. The Robinson Company has the following current assets and

current liabilities for these two years:

2014 2015

Cash and marketable securities \$50,000 \$50,000

Accounts receivable 300,000 350,000

Inventories 350,000 500,000

Total current assets \$700,000 \$900,000

Accounts payable \$200,000 \$250,000

Bank loan 0 150,000

Accruals 150,000 200,000

Total current liabilities \$350,000 \$600,000

a.       Compare the current ratios between the two years.

b.      Compare the acid-test ratios between 2014 and 2015.

2. The Robinson Company had a cost of goods sold of \$1,000,000 in

2014 and \$1,200,000 in 2015.

a. Calculate the inventory turnover for each year. Comment on

b. What would have been the amount of inventories in 2015 if

the 2014 turnover ratio had been maintained?

3. The Dayco Manufacturing Company had the following financial

statement results for last year. Net sales were \$1.2 million with net

income of \$90,000. Total assets at year end amounted to \$900,000.

a.Calculate Dayco’s asset turnover ratio and its profit margin.

b. Show how the two ratios in Part (a) can be used to determine

Dayco’s rate of return on assets.

c. Dayco operates in an industry whose average ratios are these:

Return on assets: 11 percent; Asset turnover: 2.5 times; Net

profi t margin: 3.6 percent. Compare Dayco’s performance

against the industry averages.

4. Next year, Allgreens expects its sales to reach \$33,000 with an

investment in total assets of \$10,750. Net income of \$1,225 is anticipated.

This year, sales were \$30,000, total assets were \$9,900, and net

income was \$1,000. Last year, these fi gures were \$28,000, \$9,000, and

\$750 respectively.

a. Use the DuPont system to compare Allgreens’ anticipated performance

against its prior year results. Comment on your findings.

b. How would Allgreens compare with the industry if it operates

in the same industry as Dayco (see Problem 3) and if the

industry average ratios remain the same over time?

5. Following are selected financial data in thousands of dollars for the

Hunter Corporation

2015 2014

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 expenses 2 1,390 2 1,100

Net income 110 100

a. Calculate Hunter’s rate of return on total assets in 2015 and in

2014. Did the ratio improve or worsen?

b. Diagram the expanded DuPont system for Hunter for 2015.

Insert the appropriate dollar amounts wherever possible.

c. Use the DuPont system to calculate the return on assets for

the two years, and determine why they changed.

6. Following are financial statements for the Genatron Manufacturing

Corporation for 2015 and 2014.

GENATRON MANUFACTURING CORPORATION

BALANCE SHEET 2015 2014

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 2015 2014

Net sales \$1,500,000 \$1,300,000

Cost of goods sold 900,000 780,000

Gross profi t 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 DuPont analysis to the 2015 and 2014 financial statements’

data.

b. Explain how financial performance differed between 2015 and

2014.

• 7 years ago