Financial Reporting and Analysis 13th Gi课后习题答案11.docx
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FinancialReportingandAnalysis13thGi课后习题答案11
Chapter8
Profitability
QUESTIONS
8-1.Profitscanbecomparedtothesalesfromwhichtheyaretheresidual.Theycanbecomparedtotheassetsthatgeneratesales.Or,theycanbeviewedasreturntotheowner.Eachmeasurelooksatprofitsdifferently.Thetrendsmightmoveindifferentdirections,dependingonthebase.
8-2.Extraordinaryitemsarebynaturenonrecurring.Theyshouldbesegregatedinordertoconcentrateonprofitthatwillbeexpectedinthenextperiod.Recurringearningsshouldbeusedintrendanalysisofprofitability.
8-3.Expensesasapercentofsalesmusthaveincreasedifprofitsasapercentofsalesdeclined.
8-4.Profitmargininjewelryisusuallymuchhigherthaningroceries.Groceriesgeneratetotalprofitsbasedonvolumeofsalesratherthanhighmarkup.
8-5.Adropinprofitsorariseintheassetbasecouldcauseadeclineintheratio.Forexample,highercostofsalescouldcauseadecline;or,asubstantialinvestmentinfixedassetsthatarenotyetfullyutilizedcouldcauseadecline.
8-6.DuPontanalysisrelatesreturnonassetstoturnoverandmargin.Itallowsforfurtheranalysisofreturnonassetsbythisbreakdown.
8-7.Operatingincomeissalesminuscostofsalesandoperatingexpenses.Itdoesnotincludenonoperatingitems,suchasotherincome,interest,andtaxes.Operatingassetsarebasicallycurrentassetsplusplant,property,andequipment.Theydonotincludeinvestments,intangibles,andotherassets.
Removingnon-operatingitemsfromtheDuPontanalysisgivesaclearerpictureofproductiveoperationsandtheefficientuseofthecompany’sassets.
8-8.Equityearningsaretheowner’sproportionateshareofthenonconsolidatedsubsidiaryearnings.Theseearningsareusuallygreaterthanthecashfromdividendsfromthenonconsolidatedsubsidiary.
8-9.Returnonassetsisafunctionofnetprofitmarginandtotalassetturnover.Returnonassetscoulddecline,givenanincreaseinnetprofitmargin,ifthetotalassetturnoverdeclinedsufficiently.
8-10.Returnoninvestmentmeasuresreturntoalllong-termsuppliesoffunds.Itincludesnetincomeplustax-adjustedinterestinthenumeratorandalllong-termfundsinthedenominator.Returnontotalequityisjustreturntoshareholders.
Returnoncommonequityisreturnonlytocommonshareholders.Netincomeisreducedbypreferreddividendsinthenumerator,andonlycommonequityisinthedenominator.
8-11.Returnoninvestmentisaprofitabilitymeasurecomparingincometocapitalutilizedbythefirm.Somemeasuresarereturnonassts,returnonequity,orincomeavailabletoallcapitalsources,dividedbycapital.Thegivenratioispreferred,sinceitmeasurestheprofitavailabletoalllong-termsourcesofcapitalagainstthatcapital.Theinterestismultipliedbythetaxadjustmentfactortoputinterestonanafter-taxbasis.
8-12.Thiscannotbedeterminedbasedonlyupontheabsolutemeasures.Itisnecessarytocomparethesedollarfigurestoabase,suchasinvestmentorsales.Also,itisnecessarytoknowifnonrecurringitemsarepartofthefirm’sincomepicture.
8-13.Interimreportsarelessreliablebecausetheyarenotaudited,buttheycanbeverymeaningfulinindicatingtrendsbeforetheendoftheyear.
8-14.Anobjectiveconsideredhereistimelinessratherthancompleteness.Fullstatementswouldtaketoolongandinvolvetoomuchcosttoproduce.
8-15.Comprehensiveincomeincludesnetchangesin（a）foreigncurrencytranslationadjustments,（b）unrealizedholdinggainsandlossesonavailable-for-salemarketablesecurities,and（c）changestostockholders’equityresultingfromadditionalminimumpensionliabilityadjustment.Theseitemswilltendtofluctuatemorethanotherincomeitems.
8-16.Proformafinancialinformationishypotheticaloraprojectedamount.Forproformaformationtobemeaningfulthecompanymustuseareliableestimatetoprojectfuturesales,expenses,etc.Usedimproperlyproformafinancialinformationcanbeanegativecontributiontofinancialreporting.
PROBLEMS
PROBLEM8-1
NetProfitMargin
=
NetIncomeBeforeMinorityShareofEarningsandNonrecurringItems
NetSales
2011
2010
$52,500
$40,000
$1,050,000
$1,000,000
=5.00%
=4.00%
ReturnonAssets
=
NetIncomeBeforeMinorityShareofEarningsandNonrecurringItems
AverageTotalAssets
2011
2010
$52,500
$40,000
$230,000
$200,000
=22.83%
=20.00%
TotalAssetTurnover
=
NetSales
AverageTotalAssets
2011
2010
$1,050,000
$1,000,000
$230,000
$200,000
=4.57times
peryear
=5.00times
peryear
ReturnonCommonEquity
=
NetIncomeBeforeNonrecurringItems–PreferredDividends
AverageCommonEquity
2011
2010
$52,500
$40,000
$170,000
$160,000
=30.88%
=25.00%
AhlEnterprisehashadasubstantialriseinprofittosales.Thisissomewhattemperedbyareductioninassetturnover.Givenaslightriseincommonequity,thereisasubstantialriseinreturnoncommonequity.
PROBLEM8-2
a.
2011
2010
Sales
100.0%
100.0%
Costofgoodssold
60.7
60.8
Grossprofit
39.3
39.2
Sellingexpense
14.6
20.0
Generalexpense
10.0
8.3
Operatingincome
14.7
10.9
Incometax
5.9
4.2
Netincome
8.8%
6.7%
b.StarrCanninghashadasharpdecreaseinsellingexpensecoupledwithonlyamodestriseingeneralexpensesgivinganoverallriseinthenetprofitmargin.
PROBLEM8-3
Earningsbeforeinterestandtax
$
245,000
Interest（750,000x6%）
45,000
Earningsbeforetax
$
200,000
Tax
80,000
Netincome
$
120,000
Preferreddividends
15,000
Incomeavailabletocommon
$
105,000
a.
ReturnonAssets
=
NetIncomeBeforeMinorityShareofEarningsEquityIncomeandNonrecurringItems
=
$120,000
=
4.00%
AverageTotalAssets
$3,000,000
b.
ReturnonTotalEquity
=
NetIncomeBeforeNonrecurringItems–Dividendson
RedeemablePreferredStock
=
$120,000
=
6.67%
AverageTotalEquity
$1,800,000
c.
ReturnonCommonEquity
=
NetIncomeBeforeNonrecurringItems–PreferredDividends
AverageCommonEquity
$120,000–$15,000
=
7.00%
$1,500,000
d.
TimesInterestEarned
=
RecurringEarnings,ExcludingInterestExpense,TaxExpenseEquityEarnings,andNoncontrollingInterest
=
$245,000
=
5.44times
InterestExpense,Including
CapitalizedInterest
$45,000
peryear
PROBLEM8-4
VentMolded
Plastics
PlasticsIndustry
Sales
101.0
%
100.3
%
Salesreturns
1.0
0.3
Costofgoodssold
72.1
67.1
Sellingexpense
9.4
10.1
Generalexpense
7.0
7.9
Otherincome
0.4
0.4
Otherexpense
1.5
1.3
Incometax
4.8
5.5
Netincome
5.5
%
8.5
%
Salesreturnsarehigherthantheindustry.Costofsalesismuchhigher,offsetsomebyloweroperatingexpenses.Otherexpense（perhapsinterest）issomewhathigher.Lowertaxesareperhapscausedbylowerincome.Overallprofitisless,primarilyduetocostofsales.
PROBLEM8-5
a.
$1,589,150
=
122.72%
$1,294,966
2011saleswere122.72%ofthosein2010.
b.
$138,204
=
100.80%
$137,110
2011netearningswere100.80%ofthosein2010.
c.
1.
NetProfitMargin
=
NetIncomeBeforeMinorityShareofEarnings,EquityIncomeandNonrecurringItems
NetSales
2011
2010
$149,260
=
9.39%
$149,760
=
11.56%
$1,589,150
$1,294,966
2.
ReturnonAssets
=
NetIncomeBeforeMinorityShareofEarningsandNonrecurringItems
AverageTotalAssets
2011
2010
$149,260
=
10.38%
$149,760
=
12.67%
$1,437,636*
$1,182,110*
*Usedyearendbecauseaveragecouldnotbecomputedfor2010.
3.
TotalAssetTurnover
=
NetSales
AverageTotalAssets
2011
2010
$1,589,150
=
1.11times
$1,294,966
=
1.10times
$1,437,636*
$1,182,110*
*Usedyearendbecauseaveragecouldnotbecomputedfor2010.
4.
DuPontAnalysis:
ReturnonAssets
=
NetProfitMargin
x
TotalAssetTurnover
2011
10.42*
=
9.39%
x
1.11
2010
10.72*
=
11.56%
x
1.10
*Roundingcausesthedifferencefromthe10.38%and12.67%computedin
（2）.
5.
2011
2010
Operatingincome
Netsales
$
1,589,150
$
1,294,966
Less:
Costofproductsold
$
651,390
$
466,250
Researchanddevelopmentexpenses
135,314
113,100
Generalandselling
526,680
446,110
Operatingincome
$
275,766
$
269,506
OperatingIncomeMargin
=
OperatingIncome
NetSales
2011
2010
$275,766
$269,506
$1,589,150
$1,294,966
=17.35%
=20.81%
6.
ReturnonOperatingAssets
=
OperatingIncome
AverageOperatingAssets
2011
2010
$275,766
$269,506
$1,411,686*
$1,159,666*
=19.53%
=23.24%
*Usedyearendbecauseaveragecouldnotbecomputedfor2010.
7.
OperatingAssetTurnover
=
NetSales
AverageOperatingAssets
2011
2010
$1,589,150
$1,294,966
$1,411,686*
$1,159,666*
=1.13timesperyear
=1.12timesperyear
*Usedyearendbecauseaveragecouldnotbecomputedfor2010.
8.
DuPontAnalysis:
ReturnonOperatingAssets
=
OperatingIncomeMargin
x
OperatingAssetTurnover
2011:
19.61%*
=
17.35%
x
1.13
2010:
23.31%*
=
20.81
x
1.12
*Roundingcausesthedifferencefromthe19.53%and23.24%computedin（6）.
9.
R
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