The following comprehensive assessment is based on a continuing case study of Insignia Corporation Limited. The following financial statements have been provided: Insignia Corporation Limited Income Statement For the years ended December 31, 2019 & 2020 2019 2020 ('000s) 900,000 (350,000) (75,000) (65,000) (55,000) 355,000 ("000s) 1035,000 (400,000) (80,000) (75,000) (60,000) 420,000 Sales Cost of Goods Sold Selling & Marketing Costs Admin. Expenses Depreciation Expense Earnings before Interest & Taxes Interest Expense (25,000) 330,000 (30,000) 390,000 Taxable Income Taxation (30%) (99,000)| 231,000 (117,000) 273,000 Net Income Dividends (40%) Addition to Retained Earnings 109,200 163,800 92,400 138,600
The following comprehensive assessment is based on a continuing case study of Insignia Corporation Limited. The following financial statements have been provided: Insignia Corporation Limited Income Statement For the years ended December 31, 2019 & 2020 2019 2020 ('000s) 900,000 (350,000) (75,000) (65,000) (55,000) 355,000 ("000s) 1035,000 (400,000) (80,000) (75,000) (60,000) 420,000 Sales Cost of Goods Sold Selling & Marketing Costs Admin. Expenses Depreciation Expense Earnings before Interest & Taxes Interest Expense (25,000) 330,000 (30,000) 390,000 Taxable Income Taxation (30%) (99,000)| 231,000 (117,000) 273,000 Net Income Dividends (40%) Addition to Retained Earnings 109,200 163,800 92,400 138,600
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
Problem 1PS
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Question
The company’s accountant has indicated that there was a significant decline in Insignia’s return on equity . You are require to compute the company’s Return on Equity using Du Pont Identity for 2019 and 2020, to ascertain the root cause of the decline.
Transcribed Image Text:The following comprehensive assessment is based on a continuing case study of Insignia
Corporation Limited. The following financial statements have been provided:
Insignia Corporation Limited
Income Statement
For the years ended December 31, 2019 & 2020
2019
2020
('000s)
900,000
(350,000)
(75,000)
(65,000)
(55,000)
355,000
('000s)
1035,000
(400,000)
(80,000)
(75,000)
(60,000)
420,000
Sales
Cost of Goods Sold
Selling & Marketing Costs
Admin. Expenses
Depreciation Expense
Earnings before Interest & Taxes
Interest Expense
(25,000)
330,000
(30,000)
390,000
Taxable Income
Taxation (30%)
(99,000)
231,000
(117,000)
273,000
Net Income
Dividends (40%)
Addition to Retained Earnings
92,400
109,200
138,600
163,800
Transcribed Image Text:Insignia Corporation Limited
Statement of Financial Position
As at December 31, 2018 & 2019
2019
2020
2019
2020
('000s)
('000s)
('000s)
('000s)
ASSETS
LIABILITIES & EQUITY
Current Assets
Current Liabilities
Accounts Payables
Notes Payables
Inventories
175,000
100,000
350,000
450,000
243,800
160,000
60,000
Accounts Receivables
200,000
Cash & Equivalents
350,000
395,000
220,000
275,000
900,000
1088,800
Non-current Liabilites
790,000
835,000
Non Current Assets, Net
700,000
805,000
Total Liabilities
1010,000
1110,000
Equity
Common Stock
230,000
260,000
Retained Earnings
Total Equity
360,000
590,000
523,800
783,800
TOTAL ASSETS
1600,000
1893,800
TOTAL LIAB. & EQUITY
1600,000
1893,800
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