2. Financial statements for Skyline Inc. and industry average financial ratios are shown below. Current Assets Cash A/R Inventories Total CA Net fixed assets Net plant and equipment Total Assets Sales COGS EBIT (Opering income) Interest expense EBT (Taxable income) Taxes (40%) Net income Ratio Current ratio Assets Days sales outstanding Inventory turnover Gross profit Fixed operating expenses except depreciation Earnings before interest, taxes, depre and amort (EBITDA) Depreciation Total assets turnover Net profit margin a. Calculate the indicated ratios for Skyline. Return on assets (ROA) Equity multiplier Return on equity (ROE) Debt ratio Balance Sheet as of Dec 31 Skyline 2021 Industry 75,500 330,000 300,500 706,000 315,500 Income Statement for the year ending Dec 31 Current Liabilities Accts payable Notes payable Other current liabilities Total CL Long-term debt Total Liabilities Common Equity 1,021,500 Total Liabilities and Equity Liabilities and Owner's Equity DuPont ROA 2021 1,902,650 (1,538,000) 364,650 (220,000) 144,650 (45,000) 99,650 (52,000) 47,650 (19,060) 28.590 Skyline 2021 155,000 84,000 115,000 354,000 358,500 712,500 309,000 1,021,500 Industry Average DuPont ROE 2.0 X 35 days 5.6 X 3.0 X 1.20% 3.60% b. Construct the DuPont equation for both Skyline and the industry and explain why, compared to industry, - Skyline's ROA is lower in the midst of high NPM Skyline's ROE is higher while ROA is lower 9.00% 2.50 X 60% c. Summarize Skyline's financial position by analyzing its strengths and weaknesses as revealed by your analysis. What action should the company take to improve the financial performance
2. Financial statements for Skyline Inc. and industry average financial ratios are shown below. Current Assets Cash A/R Inventories Total CA Net fixed assets Net plant and equipment Total Assets Sales COGS EBIT (Opering income) Interest expense EBT (Taxable income) Taxes (40%) Net income Ratio Current ratio Assets Days sales outstanding Inventory turnover Gross profit Fixed operating expenses except depreciation Earnings before interest, taxes, depre and amort (EBITDA) Depreciation Total assets turnover Net profit margin a. Calculate the indicated ratios for Skyline. Return on assets (ROA) Equity multiplier Return on equity (ROE) Debt ratio Balance Sheet as of Dec 31 Skyline 2021 Industry 75,500 330,000 300,500 706,000 315,500 Income Statement for the year ending Dec 31 Current Liabilities Accts payable Notes payable Other current liabilities Total CL Long-term debt Total Liabilities Common Equity 1,021,500 Total Liabilities and Equity Liabilities and Owner's Equity DuPont ROA 2021 1,902,650 (1,538,000) 364,650 (220,000) 144,650 (45,000) 99,650 (52,000) 47,650 (19,060) 28.590 Skyline 2021 155,000 84,000 115,000 354,000 358,500 712,500 309,000 1,021,500 Industry Average DuPont ROE 2.0 X 35 days 5.6 X 3.0 X 1.20% 3.60% b. Construct the DuPont equation for both Skyline and the industry and explain why, compared to industry, - Skyline's ROA is lower in the midst of high NPM Skyline's ROE is higher while ROA is lower 9.00% 2.50 X 60% c. Summarize Skyline's financial position by analyzing its strengths and weaknesses as revealed by your analysis. What action should the company take to improve the financial performance
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Transcribed Image Text:2. Financial statements for Skyline Inc. and industry average financial ratios are shown below.
Current Assets
Cash
A/R
Inventories
Total CA
Net fixed assets
Net plant and equipment
Total Assets
Sales
COGS
Net income
EBIT (Opering income)
Interest expense
EBT (Taxable income)
Taxes (40%)
Ratio
Current ratio
Assets
Days sales outstanding
Inventory turnover
Gross profit
Fixed operating expenses except depreciation
Earnings before interest, taxes, depre and amort (EBITDA)
Depreciation
Total assets turnover
Net profit margin
a. Calculate the indicated ratios for Skyline.
Return on assets (ROA)
Equity multiplier
Return on equity (ROE)
Debt ratio
Balance Sheet as of Dec 31
Skyline
2021
Industry
75,500
330,000
300,500
706,000
315,500
Income Statement for the year ending Dec 31
1,021,500
Current Liabilities
Accts payable
Notes payable
Other current liabilities
Total CL
Long-term debt
Total Liabilities
Common Equity
Total Liabilities and Equity
Liabilities and Owner's Equity
DuPont ROA
2021
1,902,650
(1,538,000)
364,650
(220,000)
144,650
(45,000)
99,650
(52,000)
47,650
(19,060)
28,590
Skyline
2021
155,000
84,000
115,000
354,000
358,500
712,500
309,000
1,021,500
DuPont ROE
Industry Average
2.0 X
35 days
5.6 X
3.0 X
1.20%
3.60%
b. Construct the DuPont equation for both Skyline and the industry and explain why, compared to industry, -
Skyline's ROA is lower in the midst of high NPM
Skyline's ROE is higher while ROA is lower
9.00%
2.50 X
60%
c. Summarize Skyline's financial position by analyzing its strengths and weaknesses as revealed by your analysis. What action should the company take to improve the financial performance.
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