Calculate the profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). How has the company’s profitability changed during the last year?
A computer manufacturer has financial statements as follows:
Income Statements for Year Ending December 31
(Thousands of Dollars)
2019
2018
Sales
$945,000
$900,000
Expenses excluding depreciation and amortization
812,700
774,000
EBITDA
$132,300
$126,000
Depreciation and amortization
33,100
31,500
EBIT
$99,200
$94,500
Interest Expense
10,470
8,600
EBT
$88,730
$85,900
Taxes (25%)
22,183
21,475
Net income
$66,547
$64,425
Common dividends
$56,609
$54,115
Addition to retained earnings
$9,938
$10,310
Balance Sheets for Year Ending December 31
Assets
Cash and cash equivalents
$47,250
$45,000
Short-term investments
3,800
3,600
Accounts Receivable
283,500
270,000
Inventories
141,750
135,000
Total current assets
$476,300
$453,600
Net fixed assets
330,750
315,000
Total assets
$807,050
$768,600
Liabilities and equity
Accounts payable
$90,000
Accruals
47,250
45,000
Notes payable
26,262
9,000
Total current liabilities
$168,012
$144,000
Long-term debt
94,500
90,000
Total liabilities
$262,512
$234,000
Common stock
444,600
Retained Earnings
99,938
Total common equity
$544,538
$534,600
Total liabilities and equity
Other data
Tax rate
25%
Shares outstanding 15,000,000
Stock price $65 per share
WACC
8%
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