Adams Corporation manufactures fasteners. The company's income statements for three years are indicated in Exhibit 1....

 

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Adams Corporation manufactures fasteners. The company's income statements for three years are indicated in Exhibit 1. The balance Sheets for the same period are shown in Exhibit 2. Exhibit 1 ADAMS CORPORATION Income Statement 2017 2018 2019 Sales (all on credit).... Cost of goods sold... Gross profit.... Selling and administrative expense.. Operating profit. . Interest expense.... Net income before taxes.. Taxes... Net Income.. Shares... $1,500,000 950,000 550,000 380,000 170,000 30,000 140,000 46,120 $93,880 40,000 $1,800,000 1.120,000 680,000 490,000 190,000 40,000 150,000 48,720 $101,280 40,000 $2,160,000 1,300,000 860,000 590,000 270,000 85.000 185,000 64.850 $120,150 46,000 Exhibit 2 ADAMS CORPORATION Balance Sheet Assets 2017 2018 2019 Cash.... Marketable securities.. Accounts receivable.. Inventory... Total Current Assets.... Net Plant and equipment..... Total Assets.... $20,000 30,000 150,000 250.000 450,000 550,000 $1,000,000 $30,000 35,000 230,000 285.000 580,000 720,000 $1,300,000 $1,894,000 $20,000 50,000 330,000 325.000 725,000 1.169,000 ........ .... Liabilities & Equity Accounts payable.... Notes payable (bank).. Total Current liabilities.. Long-term liabilities... Total liabilities... Common stock ($10 par).... Capital paid in excess of par.. Retained earnings.. . Total stockholders' equity.... Total liabilities and stockholders' equity.. $100,000 100,000 200,000 250,000 450,000 400,000 50,000 100,000 550,000 $1,000,000 $225,000 100.000 325,000 331,120 656,120 400,000 50,000 193,880 643,880 $1,300,000 $1,894,000 $200,000 300.000 500,000 550,740 1,050,740 460,000 80,000 303,260 843,260 ....... (a) Using the Du Pont System, describe the changes in the return on assets from year to year and analyze the factors affecting the ROA. (8 marks) (b) Construct the common size Balance Sheet for Adams Corporation for 2017 through 2019. Is there any observable trend in the firm's use of debt? (6 marks) (c) Prepare Indexed Balance Sheet for Adams Corporation with 2017 as the base year. Is there any observable trend in the firm's efficiency? (6 marks) Adams Corporation manufactures fasteners. The company's income statements for three years are indicated in Exhibit 1. The balance Sheets for the same period are shown in Exhibit 2. Exhibit 1 ADAMS CORPORATION Income Statement 2017 2018 2019 Sales (all on credit).... Cost of goods sold... Gross profit.... Selling and administrative expense.. Operating profit. . Interest expense.... Net income before taxes.. Taxes... Net Income.. Shares... $1,500,000 950,000 550,000 380,000 170,000 30,000 140,000 46,120 $93,880 40,000 $1,800,000 1.120,000 680,000 490,000 190,000 40,000 150,000 48,720 $101,280 40,000 $2,160,000 1,300,000 860,000 590,000 270,000 85.000 185,000 64.850 $120,150 46,000 Exhibit 2 ADAMS CORPORATION Balance Sheet Assets 2017 2018 2019 Cash.... Marketable securities.. Accounts receivable.. Inventory... Total Current Assets.... Net Plant and equipment..... Total Assets.... $20,000 30,000 150,000 250.000 450,000 550,000 $1,000,000 $30,000 35,000 230,000 285.000 580,000 720,000 $1,300,000 $1,894,000 $20,000 50,000 330,000 325.000 725,000 1.169,000 ........ .... Liabilities & Equity Accounts payable.... Notes payable (bank).. Total Current liabilities.. Long-term liabilities... Total liabilities... Common stock ($10 par).... Capital paid in excess of par.. Retained earnings.. . Total stockholders' equity.... Total liabilities and stockholders' equity.. $100,000 100,000 200,000 250,000 450,000 400,000 50,000 100,000 550,000 $1,000,000 $225,000 100.000 325,000 331,120 656,120 400,000 50,000 193,880 643,880 $1,300,000 $1,894,000 $200,000 300.000 500,000 550,740 1,050,740 460,000 80,000 303,260 843,260 ....... (a) Using the Du Pont System, describe the changes in the return on assets from year to year and analyze the factors affecting the ROA. (8 marks) (b) Construct the common size Balance Sheet for Adams Corporation for 2017 through 2019. Is there any observable trend in the firm's use of debt? (6 marks) (c) Prepare Indexed Balance Sheet for Adams Corporation with 2017 as the base year. Is there any observable trend in the firm's efficiency? (6 marks)

Answer rating: 100% (QA)

Adams Corporation Indexed Balance Sheet Particulars 2017 2018 2019 2017 2018 2019 Assets Cash 20000 ... View the full answer