Dynamite limited is a private company where a financial performance evaluation is to take place. The management
Question:
Dynamite limited is a private company where a financial performance evaluation is to take place. The management accounting department advised the management to use Return on Investment to carry out the exercise. Table below provides the data for 2020 that could be used for the analysis
Data items $
Cash 24,500
Supplies 1,870
Account receivable 28,560
Prepaid Expense 8,500
Inventory 15,800
Plant 120,000
Property 260,000
Equipment 95,000
Accumulated Depreciation-
Equipment
25,000
Accumulated Depreciation -Property 7,900
Unearned Revenue 45,000
Sales 145,000
Cost of goods sold 38,500
Operating expenses: $
Salary expenses 25,800
Supplies Expense 8,400
Utilities expense 12,000
Depreciation Expense 11,300
Rent expense 9,100
Interest Expenses 16,200
Operating Assets for year 2019 330,000
The company is taxed at 18%
Show all your calculations
REQUIRED
1. Calculate the operating profit (EBIT) for 2020
2. Calculate net income of the current year.
3. Calculate the Average Operating Assets
4. Calculate the ROI using the information on the table
5. Find ROI using the two component method [DuPont Analysis]
6. Explain why the two component method of calculating ROI is more
useful.
7. What component has contributed the most in 2020 to the ROI of this
company
8. What are the major weaknesses of ROI?
Accounting Principles Part 3
ISBN: 978-1118306802
6th Canadian edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow