Last year Justine Corp. had sales of P315,000 and a net income of P17,832, and its...

  

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Last year Justine Corp. had sales of P315,000 and a net income of P17,832, and its year-end assets were P210,000. Justine's total-debt-to-total-assets ratio was 42.5%. Based on the Du Pont equation, what was Justine's return on equity (ROE)? Problem 2. Last year Jullan Corp. had sales of P303,225, operating costs of P267,500, and year- end assets of P195,000. The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2%, and the firm's tax rate was 37%. The new CFO wants to see how the Return on Equity (ROE) would have been affected if the firm had used a 45% debt ratio. Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant. By how much would the ROE change (increase or decrease in percentage) in response to the change in the capital structure? Problem 3. Cherilyn Company's sales last year were P415,000, and its year-end total assets were P355,000. The average firm in the industry has a total assets turnover ratio of 2.4. Cherilyn's new CFO believes the company has excess assets that can be sold so as to bring the total assets turnover ratio down to the industry average without affecting sales. By how much must the assets be reduced to bring the total assets turnover ratio to the industry average, holding sales constant? ↑ Add file Problem 4. Wendy Company currently has P750,000 in accounts receivable. Its days sales outstanding (DSO) is 55 days. Wendy Company wants to reduce its DSO to the industry average of 35 days by pressuring more of its customers to pay their bills on time. The company's CFO estimates that if this policy is adopted Wendy's average sales will fall by 15%. Assuming that the company adopts this change and succeeds in reducing its average collection period to 35 days and does lose 15% of its sales, what will be the level of accounts receivable (to the nearest peso) following the change? Problem 5. Angel Company is a wholesaler that sells a single product at P103.40 per unit. Its cost analyst has collated the necessary information for the gross profit analysis, comparing actual to budget for its product. The actual and budget data for the month of March of the current year show: Sales volume (units) Cost of goods sold Required: Present the gross profit variance analysis. Actual Budgeted 5,000 6,000 $315,500 $378,600 Problem 6. Highland Coffee Company is concerned with its gross profit negating the increase of its sales. It presents the following data for two species of coffee, Arabica and Robusta, for 2020 and 2019: 2020 2019 Kilos Price/Kg. Amount Kilos Price/Kg. Amount Net sales Arabica 12,000 P390 $4,680,000 10,500 P400 $4,200,000 Robusta 10,000 360 3,600,000 11,000 330 3,630,000 Totals 8,280,000 7,830,000 Cost of goods sold Arabica 320 3,840,000 350 3,675,000 Robusta 300 3,000,000 240 2,640,000 Totals 6,840,000 6,315,000 Gross profit ₤1,440,000 ₤1,515,000 Required: Calculate and analyze the gross profit variance. Last year Justine Corp. had sales of P315,000 and a net income of P17,832, and its year-end assets were P210,000. Justine's total-debt-to-total-assets ratio was 42.5%. Based on the Du Pont equation, what was Justine's return on equity (ROE)? Problem 2. Last year Jullan Corp. had sales of P303,225, operating costs of P267,500, and year- end assets of P195,000. The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2%, and the firm's tax rate was 37%. The new CFO wants to see how the Return on Equity (ROE) would have been affected if the firm had used a 45% debt ratio. Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant. By how much would the ROE change (increase or decrease in percentage) in response to the change in the capital structure? Problem 3. Cherilyn Company's sales last year were P415,000, and its year-end total assets were P355,000. The average firm in the industry has a total assets turnover ratio of 2.4. Cherilyn's new CFO believes the company has excess assets that can be sold so as to bring the total assets turnover ratio down to the industry average without affecting sales. By how much must the assets be reduced to bring the total assets turnover ratio to the industry average, holding sales constant? ↑ Add file Problem 4. Wendy Company currently has P750,000 in accounts receivable. Its days sales outstanding (DSO) is 55 days. Wendy Company wants to reduce its DSO to the industry average of 35 days by pressuring more of its customers to pay their bills on time. The company's CFO estimates that if this policy is adopted Wendy's average sales will fall by 15%. Assuming that the company adopts this change and succeeds in reducing its average collection period to 35 days and does lose 15% of its sales, what will be the level of accounts receivable (to the nearest peso) following the change? Problem 5. Angel Company is a wholesaler that sells a single product at P103.40 per unit. Its cost analyst has collated the necessary information for the gross profit analysis, comparing actual to budget for its product. The actual and budget data for the month of March of the current year show: Sales volume (units) Cost of goods sold Required: Present the gross profit variance analysis. Actual Budgeted 5,000 6,000 $315,500 $378,600 Problem 6. Highland Coffee Company is concerned with its gross profit negating the increase of its sales. It presents the following data for two species of coffee, Arabica and Robusta, for 2020 and 2019: 2020 2019 Kilos Price/Kg. Amount Kilos Price/Kg. Amount Net sales Arabica 12,000 P390 $4,680,000 10,500 P400 $4,200,000 Robusta 10,000 360 3,600,000 11,000 330 3,630,000 Totals 8,280,000 7,830,000 Cost of goods sold Arabica 320 3,840,000 350 3,675,000 Robusta 300 3,000,000 240 2,640,000 Totals 6,840,000 6,315,000 Gross profit ₤1,440,000 ₤1,515,000 Required: Calculate and analyze the gross profit variance.

Answer rating: 100% (QA)

To calculate Justine Corps return on equity ROE using the Du Pont equation one can use the formula Net Income Sales Sales Assets Assets Equity Net Profit Margin 17832 315000 00566 or 566 Total Asset T... View the full answer