Using the data that you have compiled and or calculated in the previous requirements: 4a. Calculate Sudsy's
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Using the data that you have compiled and or calculated in the previous requirements: | |||||||
4a. | Calculate Sudsy's ROI for 2019. To calculate average total assets, use the December 31, 2018, balance sheet for the beginning balance and the budgeted balance sheet for December 31, 2019, for the ending balance. Round all of your answers to four decimal places. | ||||||
4b. | Calculate Sudsy's profit margin ratio for 2019. Interpret your results. | ||||||
4c. | Calculate Sudsy's asset turnover ratio for 2019. Interpret your results. | ||||||
4d. | Use the expanded ROI formula to confirm your results from Requirement 10. Interpret your results. | ||||||
4e. | Sudsy's management has specified a 30% target rate of return. Calculate Sudsey's RI for 2019. Interpret your results. | ||||||
4a. Calculate Sudsy's ROI for 2019. To calculate average total assets, use the December 31, 2018, balance sheet for the beginning balance and the budgeted balance sheet for December 31, 2019, for the ending balance. Round all of your answers to four decimal places. | ||||||||
Decimal | % | |||||||
ROI: | 2.3165 | = | 231.6503 | * | ||||
4b. Calculate Sudsy's profit margin ratio for 2019. Interpret your results. | ||||||||
Decimal | % | |||||||
Profit Margin Ratio: | 0.6383 | = | 63.83% | * | ||||
Interpretation: | ||||||||
A profit marging of 63.83% shows that the company generated a profit of $.64 for every $1 generated. | ||||||||
4c. Calculate Sudsy's asset turnover ratio for 2019. Interpret your results. | ||||||||
Decimal | ||||||||
Asset Turnover Ratio: | 1.7221 | 1 | ||||||
Interpretation: | ||||||||
This ratio is a reflection of how efficiently the company is utilizing it's assets to generate income. This number indicates that the company generated $1.72 in income for every $1 in assets (averaged). | ||||||||
4d. Use the expanded ROI formula to confirm your results from Requirement 10. Interpret your results. | ||||||||
Expanded ROI: | 109.93% | * | ||||||
Interpretation: | ||||||||
4e. Sudsy's management has specified a 30% target rate of return. Calculate Sudsey's RI for 2019. Interpret your results. | ||||||||
Residual Income: | 314,823.10 | |||||||
Interpretation: | ||||||||
Sudsy Days | ||||||
Balance Sheet | ||||||
December 31, 2018 | ||||||
Assets | ||||||
Current Assets: | ||||||
Cash | $ 58,000 | |||||
A/R | 22,000 | |||||
Raw Materials Inventory | 1,200 | |||||
Finished Goods Inventory | 5,400 | |||||
Total Current Assets | $ 86,600 | |||||
Plant Property & Equipment: | ||||||
Equipment | 142,000 | |||||
Less: Accumulated Depreciation | (47,000) | 95,000 | ||||
Total Assets | 181,600 | |||||
Liabilities | ||||||
Current Liabilities: | ||||||
Accounts Payable | $ 8,000 | |||||
Stockholders' Equity | ||||||
Common Stock, no par | $ 120,000 | |||||
Retained Earnings | 53,600 | |||||
Total stockholders' equity | 173,600 | |||||
Total Liabilities and Stockholders' Equity | $ 181,600 | |||||
Sudsy Days sold 7000 Soap jugs in 2019, and its actual operating income was as follows: | ||||||
Sudsy Days | ||||||
Balance Sheet | ||||||
December 31, 2019 | ||||||
Net Sales Revenue | $ 630,000 | |||||
Cost of Goods Sold: | ||||||
Variable | $ 94,890 | |||||
Fixed | 36,540 | 131,430 | ||||
Gross Profit | 498,570 | |||||
Selling & Admin Expenses: | ||||||
Variable | 12,600 | |||||
Fixed | 61,400 | 74,000 | ||||
Operating Income | 424,570 | |||||
Other income and (Expenses): | ||||||
Interest Expense | (425) | |||||
Income Before Income Taxes | 424,145 | |||||
Income Tax Expense | 22,000 | |||||
Net Income | $ 402,145 | |||||
Related Book For
Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
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