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FI-360 Homework 4-2 - Foundations of Financial Management...

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Foundations of Financial Management FI360 Homework Assignment 4 “Financial Statement Analysis” 1. Dental Delights has two divisions. Division A has a profit of $200,000 on sales of $4,000,000. Division B is only able to make $30,000 on sales of $480,000. Based on the profit margins (returns on sales), which division is superior? Division A Division B Net Income 200,000 = 5% 30,000 =6.25% Sales 4,000,000 480,000 Division B is superior 2. Griffey Junior Wear, Inc., has $800,000 in assets and $200,000 of debt. It reports net income of $100,000. a. What is the return on assets? b. What is the return on stockholders’ equity? a. return on assets- Net Income 100,000 = 12.5% Total Assets 800,000 b. stockholders equity- debt total assets total equity rs' Stockholde - = Net Income 100,000 = 16.67% Stockholders equity 600,000 3. One-Size-Fits-All Casket Co.’s income statement for 2008 is as follows: Sales ....................................................................................... $3,000,000 Cost of goods sold .................................................................. 2,100,000 Gross profit ............................................................................ 900,000 Selling and administrative expense ........................................ 450,000 Operating profit ...................................................................... 450,000 Interest expense ...................................................................... 75,000 Income before taxes ............................................................... 375,000 Taxes (30%) ...........................................................................
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