Module Five Homework

Please use the financial statements below to respond to the following questions:

$1.$ Calculate the return on equity $($ROE$)$ and return on assets $($ROA$)$ for $2019$ and $2018$ to two decimal places.

$2.$ Please note next to each ratio what this ratio tells us$.$

$3.$ Please compare the company ratios with the industry averages noted at the end of the page and determine how the company compares to the industry.

$20192018$

Return on equity $($ROE$)0\mathrm{.}470\mathrm{.}44$

Return on assets $($ROA$)0\mathrm{.}180\mathrm{.}19$

Balance Sheet:

Assets $20192018$ Liabilities and equity $20192018$

Cash and cash equivalents $ $4,000$ $ $5,100$ Accounts payable $ $2,600$ $ $2,220$

Short$-$term investments $2001000$ Accruals $4,3002,560$

Accounts Receivable $4,2003,500$ Notes payable $10340$

Inventories $5,8005,400$ Other Current liabilities $970870$

Other Current Assets $2,000140$ Total current liabilities$7,8805,990$

Total current assets $16,20015,140$ Long$-$term debt $3,5003,670$

Land and Buildings $2,7742,540$ Deferred income taxes $3,0113,220$

Machinery and Equipment $6,7006,600$ Total liabilities $14,39112,880$

Total gross fixed assets $9,4749,140$ Common stock $33$

Less: Depreciation $-4,700-4,500$ Additional Paid$-$In Capital $7,1506,346$

Net fixed assets $4,7744,640$ Retained Earnings $1,8803,501$

Goodwill $440440$ Total common equity $9,0339,850$

Deferred income taxes $2,0102,510$

Total assets $ $23,424$ $ $22,730$ Total liabilities and equity $ $23,424$ $ $22,730$

Income Statement:

$20192018$

Sales $ $40,000$ $ $37,000$

COGS $22,00020,400$

Gross Profits $18,00016,600$

Less Operating Expenses

Overhead $($excl$.$ depreciation$)12,00010,700$

EBITDA $6,0005,900$

Depreciation $700500$

Operating Profit $($EBIT$)5,3005,400$

Interest expense $5050$

Net Profit before Taxes $($EBT$)5,2505,350$

Taxes $(21\%)11031124$

Net Income $ $4,147$ $ $4,226$

Number of shares of common stock outstanding $1,570$ in $2018$ and $2019$

Industry Averages:

Return on equity $($ROE$)45\mathrm{.}0\%$

$\text{'}\text{'}\text{'}\text{'}16\mathrm{.}2\%$

$*$ The company paid out a portion of the net income as dividends in $2018$ and $2019.$