Following are financial statements for the Genatron Manufacturing Corporation fo
ID: 2675806 • Letter: F
Question
Following are financial statements for the Genatron ManufacturingCorporation 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
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.