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Bus 332 Homework 5

In: Business and Management

Submitted By andywang0629
Words 1423
Pages 6
1. [ROA and ROE models and Ratio Components] The Salza Technology Corporation successfully increased its “top line” sales from $375,000 in 2012 to $450,000 in 2013. Net income also increased as did the venture’s total assets. You have been asked to compare the financial performance between the two years.

Salza Technology Corporation Annual Income Statements (in $ Thousands) | 2012 | 2013 | Net sales | $375 | $450 | Less: Cost of goods sold | -225 | -270 | Gross profit | 150 | 180 | Less: Operating expenses | -46 | -46 | Less: Depreciation | -25 | -30 | Less: Interest | -4 | -4 | Income before taxes | 75 | 100 | Less: Income taxes | -20 | -30 | Net income | $ 55 | $70 | Cash dividends | $ 17 | $ 20 |

Balance Sheets as of December 31 (in $ Thousands) | 2012 | 2013 | Cash | $ 39 | $ 16 | Accounts receivable | 50 | 80 | Inventories | 151 | 204 | Total current assets | 240 | 300 | Gross fixed assets | 200 | 290 | Less accumulated depreciation | −95 | −125 | Net fixed assets | 105 | 165 | Total assets | $345 | $465 | Accounts payable | $ 30 | $ 45 | Bank loan | 20 | 27 | Accrued liabilities | 10 | 23 | Total current liabilities | 60 | 95 | Long-term debt | 15 | 15 | Common stock | 85 | 120 | Retained earnings | 185 | 235 | Total liabilities and equity | $345 | $465 |

A. Calculate the net profit margin and the sales-to-total assets ratio for Salza for 2013 using average total assets. Also calculate the return on total assets in 2013 using average total assets.
Net profit margin: $70/$450 = 15.56%Sales-to-average-total-assets ratio: $450/(($345 + $465)/2) = $450/$405 = 1.1111Return on average total assets: $70/$405 = 17.28%

B. Calculate the ratios in the ROA model for both 2012 and 2013 using year-end total assets. Comment on any financial ratio…...

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