8- 1
Ahl Enterprise lists the following data for 2011 and 2010:
2011
2010
Net income
$ 52,500 $ 40,000
Net sales
1,050,000 1,000,000
Average total assets
230,000
200,000
Average common equity 170,000
160,000
Required Calculate the net profit margin, return on assets, total asset turnover, and return on
common equity for both years. Comment on the results. (For return on assets and total asset
turnover, use end-of-year total assets; for return on common equity, use end-of-year common
equity.)
8-4
Revenue and expense data for Vent Molded Plastics and for the plastics industry
as a whole follow:
Vent Molded Plastics Plastics Industry
Sales
$462,000
100.3%
Sales returns
4,500
0.3
Cost of goods sold 330,000
67.1
Selling expenses 43,000
10.1
General expenses 32,000
7.9
Other income
1,800
0.4
Other expense
7,000
1.3
Income tax
22,000
5.5
Required Convert the dollar figures for Vent Molded Plastics into percentages based on net sales.
Compare these with the industry average, and comment on your findings
P 9-1 McDonald Company shows the following condensed income statement information for
the current year:
Revenue from sales
Cost of products sold
Gross profit
Operating expenses:
Selling expenses
General expenses
Operating income
Other income
$ 3,500,000
(1,700,000)
1,800,000
$ 425,000
350,000 (775,000)
1,025,000
20,000
Interest
Operating income before income taxes
Taxes related to operations
Income from operations
Extraordinary loss (less applicable income taxes of $40,000)
Income before noncontrolling interest
Noncontrolling interest (loss)
Net income
(70,000)
975,000
(335,000)
640,000
(80,000)
560,000
(50,000)
$ 510,000
Required Calculate the degree of financial leverage.
P 9-9 Assume the following facts for the current year:
Net income
$200,000
Common dividends
$ 20,000
Preferred dividends (The preferred stock is not convertible.) $ 10,000
Common shares outstanding on January 1
20,000 shares
Common stock issued on July 1
5,000 shares
2-for-1 stock split on December 31
Required


a. Compute the earnings per share for the current year.
b. Earnings per share in the prior year was $8.00. Use the earnings per share computed in
(a) and present a two-year earnings per share comparison for the current year and the
prior year.