2) Using the financial statements for ABC Cellphone and the industry ratios:

a) (8 marks) Calculate three profitability ratios for ABC Cellphone and compare them to the industry. For each of these three ratios, comment on why it might be viewed as positive or negative relative to the industry giving the interpretation of the ratio.

b) (7 marks) Construct the DuPont identity for ABC Cellphone and explain the ratios found and their impact on the profitability.

ABC Cellphone Statement of Comprehensive Income 2018

Sales 35,799,300 .

Cost of goods sold 26,669,496

Other expenses 4,641,000 .

Depreciation 1,640,200

EBIT 2,848,604 .

Interest 573,200

Taxable income 2,275,404 .

Taxes (40%) 910,162 .

Net income 1,365,242 .

Dividends 80,000

Add to retained earnings 1,285,242

Statement of Financial Position 2018

Current assets

Cash 396,900 .

Accounts receivable 637,560 .

Inventory 933,400 .

Total current assets 1,967,860 .

Fixed assets

Net plant and equipment 13,411,620 .

Total assets 15,379,480 .

Liabilities and Equity

Current liabilities

Accounts payable 844,550 .

Notes payable 1,928,500 .

Total current liabilities 2,773,050 .

Long-term debt 3,050,000 .

Owners' equity

Common stock 322,500 .

Retained earnings 9,233,930 .

Total equity 9,556,430

Total liabilities and owners' equity 15,379,480 .

CELLPHONE INDUSTRY RATIOS

Current ratio 1.40

Quick ratio 0.39 .

Cash ratio 0.20

Total asset turnover 2.40 .

Inventory turnover 30.00

Receivables turnover 9.80 .

Total debt ratio 0.52

Debt-equity ratio 1.10

Equity multiplier 2.10

Times interest earned 8.10 .

Cash coverage ratio 8.40

Profit margin 6.99%

Return on assets 10.54% .

Return on equity 35.23% .

Please give detail of the solution way with formulas or calculator keys, not excel way. Thanks!