Assingmemt#2 - To: Dr. Jan From: Lina Xia, LiPing Zhou....

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To: Dr. Jan From: Lina Xia, LiPing Zhou. Date: May 22, 2007 Subject: Analysis Martek Biosciences Corp.’s depreciation According to David Reilly, the kind of assets that is subject of the controversy described in this article is “idle asset” in part of property, plant and equipment of Martek Biosciences Corp. that is “held-for future use.” According to note 7, these assets are located in the property, plant and equipment within the asset category under the construction in progress of the balance sheet. Martek Biosciences Co. used straight line method to depreciate of PPE. This company’s asset held for future use amount is $94302 (P52). The effective tax rate is 36.5% (P33). The asset useful lives is 15 years. The depreciation after tax is (94302/15)*(1- 36.5%)=3.992 millions. Fixed asset turnover ratio equals to Net Sales divided by Average Fix asset, which Net Sale is $70,261; the Average Fix Asset is (291,445+293,564) / 2 = 292,504.5. The Fixed Asset Turnover ratio is 0.24. The Profit Margin on Sales equals Net Income divided by
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Assingmemt#2 - To: Dr. Jan From: Lina Xia, LiPing Zhou....

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