Following are financial statements for the Genatron Manufacturing Corporation fo
ID: 2676785 • 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
Net plant and equipment 200,000 150,000 150,000
Land 50,000 50,000 50,000
Total fixed assets 250,000 200,000 200,000
Total assets $500,000 $400,000 $352,000
LIABILITIES AND EQUITY
Accounts payable $ 78,000 $ 65,000 $ 58,000
Notes payable 34,000 10,000 10,000
Accrued liabilities 30,000 25,000 25,000
Total current liabilities 142,000 100,000 93,000
Long-term debt 140,000 100,000 71,000
Total liabilities $282,000 $200,000 $164,000
Common stock
($1 par, 50,000 shares) $ 50,000 $ 50,000 $ 50,000
Paid-in capital 100,000 100,000 100,000
Retained earnings 68,000 50,000 38,000
Total stockholders equity 218,000 200,000 188,000
Total liabilities and equity $500,000 $400,000 $352,000
YEARS ENDED DECEMBER 31 2012 2011 2010
Net revenues or sales $700,000 $600,000 $540,000
Cost of goods sold 450,000 375,000 338,000
Gross profit 250,000 225,000 202,000
Operating expenses:
General and administrative 95,000 95,000 95,000
Selling and marketing 56,000 50,000 45,000
Depreciation 25,000 20,000 15,000
Operating income 74,000 60,000 47,000
Interest 14,000 10,000 7,000
Income before taxes 60,000 50,000 40,000
Income taxes (40%) 24,000 20,000 16,000
Net income $ 36,000 $ 30,000 $ 24,000
Number of shares outstanding 50,000 50,000 50,000
Earnings per share $0.72 $0.60 $0.48
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
a. Calculate Genatron’s dollar amount of net working capital in each year. Net working capital = Current assets – Current liabilities 2012: $800,000 – $330,000 = $470,000 2011: $700,000 – $270,000 = $430,000 b) Current ratio = Assets/Current liabilities 2012: $800,000/$330,000 = 2.42 2011: $700,000/$270,000 = 2.59 Acid-test ratio = (CA – Inventory)/CL 2012: ($800,000 – $500,000)/$330,000 = 0.91 2011: ($700,000 – $450,000)/$270,000 = 0.93 c. Calculate the average collection period and the inventory-turnover ratio in each year. Average collection period = AR/(Sales/365) 2012: $260,000/($1,500,000/365) = 63.3 days 2011: $200,000/($1,300,000/365) = 56.2 days Inventory turnover = COGS/Inventory 2012: $900,000/$500,000 = 1.80 2011: $780,000/$450,000 = 1.73