Question Details

Albers Automotive





Comparative data for Albers Automotive for the two-year period 2009-2010 are presented below.

Income Statement Data
	 2010	 2009
Net Sales	$1,500,000	$1,200,000
Cost of Goods Sold	   934,000	   741,000
Gross Profit	$  566,000	 $  459,000
Operating Expense	   376,000	   277,000
Operating Income	$  190,000	$  182,000
Other Expense (interest)	    15,000	    12,000
Earnings Before Income Tax	$  175,000	$  170,000
Income Taxes	    66,000	    71,000
Net Income	$  109,000	$   99,000
Dividends Paid	    48,000	    42,000
Net Increase in Retained Earnings	$   61,000	$   57,000


Balance Sheet Data
Assets	 2010	2009
Cash	$   30,000	$ 10,000
Receivables (net)	130,000	 90,000
Inventory	170,000	 113,000
Land, Buildings, and Equipment (net) 	 650,000	547,000
Intangible Assets	    20,000	  20,000
	$1,000,000	$780,000

Liabilities and Stockholders' Equity
	 2010	2009
Trade Notes and Accounts Payable	$  100,000	$ 40,000
Miscellaneous Current Liabilities	 50,000	 11,000
5% Bonds Payable	 300,000	 240,000
Common Stock, $10 Par	 100,000	 100,000
Additional Paid-In Capital	 51,000	 51,000
Retained Earnings	   399,000	 338,000
	$1,000,000	$780,000

Market price of stock end-of-each year:                               $81                    $68

 
Required:

a.	Compute the following ratios for both years.
	1.	net profit margin
	2.	total asset turnover (use year-end assets)
	3.	return on assets (use year-end assets)
	4.	operating income margin
	5.	operating asset turnover (use year-end assets)
	6.	return on operating assets (use year-end assets)
	7.	return on investment (use year-end, long-term debt and stockholders equity)
	8.	return on total equity (use year-end total equity)
	9.	basic earnings per share
	10.	degree of financial leverage
	11.	price/earnings ratio
	12.	dividend payout ratio
	13.	dividend yield
b.	Perform a DuPont analysis for both years, using both net profit and operating income. Comment on the results.
c.	Comment on the trend in profitability as indicated by the ratios given.
d.	Why is return on investment lower than return on equity?
e.	Describe the firm's dividend policy. Could this be related to market price?





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