Warm up exercises E3-1 INCOME STATEMENT Sales (-) Cost of good Sales a) Gross Profit

(-) Operating Expenses

($000,000) 345 255 90 25 22 18 4 69 21 3 18 6.3 11.7 4.7 7 1.65

Depreciation General and administration expenses Sales expense Lease expense Operating profit (-) Interest expense
Net pofit before tax

(-) Taxes (35%) b) Net pofit after tax (-) Dividend Earning per share (EPS)

Income statement can be called a profit and loss

E3-2

statement because the statement provides information that shows the difference of income and expenses that derive to the company's profit of the year
Balance in balance sheet means the balances of

the firm's assets against its liabilities and owner's equity. We balance the two halves to show the firm's financial position at a given point in time. E3-3 Statement of retaioned Earnings Retained earning balance (beginning) Plus :Net profit after taxes Less : Dividend Preferred Stock Common Stock Total dividend paid Retained earning balance (closing) ($000,000) 25.32 5.15 0.75 3.85 4.6 25.87

E3-4

Yes I agree with the Ceo claim that the firm is lean and soon be profitable. The firms has healthy quick ratio and currnt ratio. However the firms need to becareful of the inventory level as the company 's inventory are types of cannot be easily sold because they are partially completed items, special item and the like. At the times when the company face the dire need for liquidity, the inventory is the most difficult to convert into cash by selling it.

p3-1 The income statement provides a financial summary of the firm's operating results during a specific period. The balance sheet presents the summary statement of the firm's financial position at given time. the retained earning statement is an abbreviate form of the statement of shareholder's equity.

ults during a specific period. ion at given time. holder's equity.

Account name Account payable Account receivable Accruals Accumulated depreciation Administrative expense Buildings Cash Common stock (at par) Cost of goods sold Depreciation Equipment General expense Interest expense Inventories Land Long-term debts Machinery

Statement (column 1) Balance sheet Balance sheet Balance sheet Balance sheet Income statement Balance sheet Balance sheet Balance sheet Income statement Income statement Balance sheet Income statement Income statement Balance sheet Balance sheet Balance sheet Balance sheet

Type of account (column 2) Current liability Current assets Current liability Fix assets Expense Fix assets Current assets Stockholders equity Expense Expense Fix assets Expense Expense Current assets Fixed assets Current liability Fixed assets

Marketable securities Notes payable Operating expense Paid-in capital in excess of par Preferred stock Preferred stock dividends Retained earnings Sales revenue Selling expense Taxes Vehicles

Balance sheet Balance sheet Income statement Balance sheet Balance sheet Balance sheet Balance sheet Income statement Income statement Income statement Balance sheet

Current assets Current liability Expense Stockholders equity Stockholders equity Stockholders equity Stockholders equity Revenue Expense Expense Fixed assets

P3-3 (m/s 96)

Revenue Operating Expenses Salaries Employment tax & benefits Admin Exp Travel & Entertainment Lease Payment (2700 x 12) Depreciation Total Operating Expenses Operating Profit Less: Interest Profit before tax Less : Tax ( 30% x 55 000) Net Profit after Interest & Tax

360 000 180 000 34 600 10 400 17 000 32 400 15 600 290 000

( 290 000 ) 70 000 ( 15 000) 55 000 ( 16 500 ) 38 500

ADAM & ARIN ADAM's Income and Expense Statement fo for the year ended 31 December 2012 Income Salaries (45k+30k) Dividend received Interest received Total income Expenses Auto Insurance Home insurance Auto loan payment Mortgage payment Utilities Groceries Medical Property taxes Income tax, Social Security Clothes and accessories Gas and auto repair Entertainment Total expenses

75 000 150 500 75 650

600 750 3 300 14 000 3 200 2 200 1 500 1 659 13 000 2 000 2 100 2 000 46 309

b) Cash Surplus c) During the year, Adam & Arin Adam's had a total income of RM 75 650 and total expenses of RM 75 650 and total expenses of RM 46 309, which left them with a cash surplus of RM 29 341. They can use the surplus to increase their sharing and investment.

P3-5 (page 97)

Net profit before tax Tax (40% x 218 000) Profit after tax Preferred stock dividends Earnings available for common stockholders

218 000 87 200 130 800 32 000 98 800

EPS = Earnings available for common stockholders Number of shares of common stock outstanding = RM 98 800 RM 85 000 EPS = RM 1.16 (b) RM 0.80 x 85 000 shares Profit after tax Less : Cash Dividends Preffered Stock Common Stock Retained Earning 68 000 130 800 ( 32 000) ( 68 000) 30 800

P3-6 page 97 Owen Daris Company's Balance Sheet as at Dec 31,2012 Assets Accounts receivable Marketable securities Cash Total current assets Land Buildings Equipment Furniture and Fixtures Machinery Vehicles Total gross fixed assets Less : Accumulated Depreciation Net Fixed Assets Total Assets Liabilities and Stockholder's Equity Accounts payable Accumulated Notes payable Total current liabilities Long term debts Total liabilities Common stock (at par) Paid in capital in exceess (at par) Preffered stock Retain Earnings Total Investment 220 55 475 750 420 1 170 90 360 100 210 1 930 450 75 215 740 100 225 140 170 420 25 1 080 -265 375 815 1 555

P3-7 page 98 ADAM AND ARIN ADAMS BALANCE SHEET AS OF DEC 31, 2012 Assets Cash on hand Checking accounts Savings accounts Money market funds Total liquid assets IBM stock Retirement funds, IRA Total investment Real estate 2011 Sebring 2010 Jeep Jewelry and artwork Household furnishings Total personal property Total Assets 300 3 000 760 1 200 5 260 2 000 2 000 4 000 150 000 15 000 8 000 3 000 4 200 180 200 189 460 Liabilities and Net Worth Medical bills payable Utility bills payable Credit card balance Total current liabilities Auto loan Mortgage Personal loan Total long term liabilities Net worth MISC Total liabilities and Net worth

b) The Adam's family total assets as of December 31, 2012 is RM 189 40.00 c) Total Liquid Assets Total Current Liabilities Net working Capital RM 5 260 RM 2 400 RM 2 860

250 150 2 000 2 400 8 000 100 000 3 000 111 000 76 500 440 189 900

p3-8 pages 96 Conrad Air, Inc. Balance Sheet as of December 31,2012 Assets Cash Marketable securities Accounts receivable Invntories Current assets Equipment Buildings Fixed assets Total assets 120000 35000 45000 130000 330000 2970000 1600000 4570000 4900000 Liabilities and Stockholders' Equity Accounts payable Short-term notes Current liabilities Long-term debt Total liabilities Common stock Retained earnings Stockholders' equity Total liabilities and equity 70000 55000 125000 2700000 2825000 500000 1575000 2075000 4900000

a) Conrad paid no dividends during the year and invested the funds in marketable securities

Assets Cash Marketable securities Accounts receivable Invntories Current assets Equipment Buildings Fixed assets Total assets 120000 1400000 45000 130000 1695000 2970000 1600000 4570000 6265000

Liabilities and Stockholders' Equity Accounts payable Short-term notes Current liabilities Long-term debt Total liabilities Common stock Retained earnings Stockholders' equity Total liabilities and equity 70000 55000 125000 2700000 2825000 500000 2940000 3440000 6265000

b) Conrad paid no dividends totaling RM 500,000 and used the balance of the net income to retire (pay off) long-

Assets Cash Marketable securities Accounts receivable Invntories Current assets Equipment Buildings Fixed assets 120000 35000 45000 130000 330000 2970000 1600000 4570000

Liabilities and Stockholders' Equity Accounts payable Short-term notes Current liabilities Long-term debt Total liabilities Common stock Retained earnings dividend 70000 55000 125000 1835000 1960000 500000 1940000 500000

Total assets

4900000

Stockholders' equity Total liabilities and equity

2940000 4900000

c) Conrad paid dividends totaling RM 500,000 and invested the balance of the net income in building a new hanga

Assets Cash Marketable securities Accounts receivable Invntories Current assets Equipment Buildings hangar Fixed assets Total assets 120000 35000 45000 130000 330000 2970000 1600000 865000 5435000 5765000

Liabilities and Stockholders' Equity Accounts payable Short-term notes Current liabilities Long-term debt Total liabilities Common stock Retained earnings dividend Stockholders' equity Total liabilities and equity 70000 55000 125000 2700000 2825000 500000 1940000 500000 2940000 5765000

d) Conrad paid out all RM 1,365,000 as dividends to its stockholders. Assets Cash Marketable securities Accounts receivable Invntories Current assets Equipment Buildings Fixed assets Total assets 120000 35000 45000 130000 330000 2970000 1600000 4570000 4900000 Liabilities and Stockholders' Equity Accounts payable Short-term notes Current liabilities Long-term debt Total liabilities Common stock Retained earnings dividend Stockholders' equity Total liabilities and equity 70000 55000 125000 2700000 2825000 500000 210000 1365000 2075000 4900000

income to retire (pay off) long-term debt.

t income in building a new hangar.

p3-9 Original price per share = Market price per share EPS = 0.75 900000/300000 = 0.25

P3-10 (page 99) Hayes Enterprises Statement of Retained Earnings For the year ended December 31, 2012 Retained Earnings Balance (Jan 1,2012 ) Plus: - Net Profits after taxes (for 2012) Less: - Cash Dividends (paid during 2012) Preffered stock Common stock (balancing figure) Total Dividends paid Retained earnings balance (Dec 31,2012) 928 000 377 000 ( 47 000) (210 000) (257 000) 1 048 000

(b) EPS = Earnings available for common stockholders Number of shares of sommon stock outstanding = RM 377 000 RM 140 000 = RM 2.69 (c ) RM 210 000 RM 140 000 RM1.50 A RM 1.50 per-share cash dividend the firm paid on common stock for 2012

The company paid total dividends of $200,000 during fiscal 2012. (a) What was Mountain Air's net income for fiscal 2012? = $500,000 (b) How many new shares did the corporation issue and sell during the year? = $1000000 (c) At what average price per share did the new stock sold during 2012 sell? = $ 3.00 (d) At what price per share did Mountain Air's original 500,000 shares sell? = $ 1.00

a)

The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. Because business operations differ in each industry, it is always more useful to compare companies within the same industry.

b)

c)

The higher the ratio, the greater risk will be associated with the firm's operation. In addition, high debt to assets ratio may indicate low borrowing capacity of a firm, which in turn will lower the firm's financial flexibility. Like all financial ratios, a company's debt ratio should be compared with their industry average or other competing firms.

P3-13 page 100

Items Total Current Assets Total Current Liabilities Current Ratio Current Ratio = Current Assets Current Liabilities Quick Ratio = (Current Assets - Inventory) Current Liabilities

2009 16 950 9 000 1.88

2010 21 900 12 600 1.74

2011 22 500 12 600 1.79

2012 27 000 17 400 1.55

Items Total Current Assets Less : Inventory Divide with total Current Liabilities Quick Ratio

2009 16 950 (6 000) 10 950 9 000 1.22

2010 21 900 (6 900) 15 000 12 600 1.19

2011 22 500 (6 900) 15 600 12 600 1.24

2012 27 000 (7 200) 19 800 17 400 1.14

b) The firms Liquidity has been reducing over the 2009 - 2010 period. This is because of the increase in liabilities worth RM 3 600 and increased in cash tied up in inventory of RM 900. c)

P3-14 page 101

Liquidity Ratio Current Ratio = Current Assets Current Liabilities = RM 5 000 RM 2 100 = RM 2.38

Current Assets Cash Marketable securities Checking Accounts Total Current Assets Current Liabilities Credit card payable Short term notes payable Total Current Liabilities 3 200 1 000 800 5 000

1 200 900 2 100

Josh has a liquidity ratio of 2.38, which is much higher compared to his other friends of 1.8. This shows that Josh has a greater degree of liquidity. Therefore, Josh would be able to pay for his short-term obligations such as his credit card payment and notes payables when they come due. However, liquid assets like cash held at bank and marketable securities that Josh has would not earn him a particularly high rate of return.

hen they come due. s would not earn him a

P3-15 page 101 Quarter 1 2 3 4 Inventory 400 000 800 000 1 200 000 200 000 2 600 000 Sales Cost of good sold Gross profit margin RM 4 000 000 ( RM 2 400 000 ) RM 1 600 000

( 60% ( 40%

2 600 000 4 650 000 (averge Inventory)

Inventory turnover = Cost of good sold Inventory = 2 400 000 650 000 = 3.69

Average age for Inventory

365 days 3.69 = 98.92 days

b) Wilkins inventory are held longer compared to the other company in the industry. This could be due to the items produce by Walkins manufacturing are slow moving products. The products could be seasmal items.

p3-16 300,000 2.4 mil/365 = 45.60 days a

b. 70% x 2.4 mil = 1.68 mil 1.68mil 2.4 mil/365 = 65.5 days it will effect because the payback time is longer in b than in a

a)

This ratio should be compared against industry averages. A low turnover implies poor sales and, therefo strong sales or ineffective buying.High inventory levels are unhealthy because they represent an investm company up to trouble should prices begin to fall.

b)

Possessing a lower average collection period is seen as optimal, because this means that it does not tak cash. Ultimately, every business needs cash to pay off its own expenses (such as operating and adminis

c)

A shorter payment period indicates prompt payment to creditors, but a very short payment may be an indication that allowed by suppliers.

ow turnover implies poor sales and, therefore, excess inventory. A high ratio implies either nhealthy because they represent an investment with a rate of return of zero. It also opens the

mal, because this means that it does not take a company very long to turn its receivables into wn expenses (such as operating and administrative expenses).

t a very short payment may be an indication that the company is not taking full advantage of the credit terms

Debt Debt ratio Total liabilities Total assets Earnings before interest and taxes Interest Earnings before interest and taxes + Lease payment Int. + Lease pay. + {(Prin. + Pref.div.) x [1/(1 - T)]}

Times interest earned ratio

Fixed-payment coverage ratio

creek Enterprise 36500000 50000000 3000000 1000000

industry average

0.73 3

0.51 7.3

3000000+200000 1000000+200000(1/(1-.4)) 3200000 1992000

1.606

1.85

Common Size income statement is to evaluate profit in relation to sales. The ratios that are directly come from the common size income statement are 1) the gross profit margin 2) The operating profit margin 3) the net profit margin Gross profit margin Gross profits Sales

34.1 100

0.341

Gross profit margin is to measure the percentage of each sales dollar after the firm paid for its good. The higher gross p Operating profit margin Operating profits Sales

10.9 100

0.109

Operating profit margin is to measure the percentage each sales dollar after all cost and other expenses is paid. A high Net profit margin Earnings available for common stockholders Sales

5.5 100

0.055

Net Profit margin is to measure the sales dollar after all cost and expense, including tax, interest and dividend is paid. T margin the better.

profit margin 2) The operating profit

ter the firm paid for its good. The higher gross profit margin, the better.

after all cost and other expenses is paid. A higher profit margin is prefered

se, including tax, interest and dividend is paid. The higher the net profit

p3-20 a Debt Ratio = Total liabilities Total Assets = = Pelican Inc 1000000 10000000 10%

Times Interest Debt Ratio = Eraning Before Interest & rate Taxes

= =

6250000 2460000 2.5

b Operating profit margin = Operating profits Sales

= =

6250000 25000000 0.25

Net profit margin = Earnings available for common stockholders Sales

= =

3690000 25000000 0.1476

Return on total assets (ROA) = Earnings available for common stockholders Total assets

= =

3690000 10000000 0.369

Return on common equity Earnings available for common stockholders stock equity

= =

3690000 9000000 0.41

Timber Forest inc = = 5000000 10000000 50%

= =

5260000 2300000 2.7

= =

6250000 25000000 0.25

345000 25000000 0.0138

= =

345000 10000000 0.0345

= =

345000 5000000 0.069

P3-21 page 105

a) Gross Profit = Gross Profit Sales = 32 000 000 40 000 000 = 80% Gross profit = RM 32 000 000

b) Cost of goods sold Sales = 40 000 000 Cost of Goods Sold = 8 000 000 Gross profit = 32 000 000 Cost of Goods Sold = RM 8 000 00

c) Operating Profits = Operating Profit Sales = 14 000 000 40 000 000 Operating Profits = RM 14 000 000

= 35%

= 35%

d) Operating Expenses Gross Profit = 32 000 000 Operating Expenses = 18 000 000 Operating Profit = 14 000 000 Operating Expenses = RM 18 000 000 ROA = Common Stock Sales x Sales = Common Stock Total Asset Sales

16% = 6 400 4 000

e) Earnings available for common stockholders ROE = Earning available for common stockholders Common stock Equity = 640 000 3 200 000 = 20% Earnings available for common stockholders = RM 640 000

Ratio Liquidity Current ratio

Formula

Fox manufacturing comp

Current assets Current liabilities Current assets - Inventory Current liabilities

138300 75000 138300-82000 75000

Quick (acid-test) ratio

Activity Inventory turnover Cost of goods sold Inventory Accounts receivable Average sales per day Accounts payable Average purchases per day Sales Total assets 460000 82000 34100 600000/365 57000 460000/365 600000 408300

Average collection period

Average payment period

Total assets turnover

Debt Debt ratio Total liabilities Total assets Earnings before interest and taxes Interest 225000 408300 80000 10000

Times interest earned ratio

Profitability Gross profit margin Gross profits Sales Operating profits Sales Earnings available for common stockholders Sales 140000 600000 80000 600000

Operating profit margin

Net profit margin

42900 600000

Profitability (cont.) Earnings available for common stockholders Number of shares of common stock outstanding Earnings available for common stockholders Total assets Earnings available for common stockholders common stock

Earnings per share (EPS)

42900 110200

Return on total assets (ROA)

42900 408300

Return on common equity

42900 110200

The five key aspects of performance is liquidity, activity, debt, profitability, and market. i. Liquidity The firms liquidity seems to be good. ii. iii. iv. -

Activity Inventory appears to be in good shape. The average collection period seems to have crep

Debt Indebtedness increased over the 2010-2012 period and is currently above the industry av

Profitability Profitability relative to sales in 2012 was better than the average company in the industry,

v. Market -Investors have greater confidence in the firm in 2012 than in the prior 2 years, as reflected in the

Fox manufacturing company

Industry average

1.844

2.35

0.75

0.87

0.56

4.55

20.74 days

35.8 days

26.4 days

1.47

1.09

0.55

0.3

12.3

0.233

0.202

0.133

0.135

0.0715

0.091

0.39

0.105

0.099

0.39

0.167

riod seems to have crept up above that of the industry. Overall liquidity appears to be good, receivables and payables should b

y above the industry average. However, Bartlett has evidently improved its income in 2012 so that it is able to meet its interest

ompany in the industry, although it did not match the firms 2010 performance. The firms earnings per share, return on total a

ears, as reflected in the price/earnings (P/E) ratio of 11.1. However, this ratio is below the industry average. In summary, the f

eivables and payables should be examined.

hat it is able to meet its interest and fixed-payment obligations at a level consistent with the average in the industry.

ngs per share, return on total assets, and return on common equity behaved much as its net profit margin did over the 2010-20

try average. In summary, the firm appears to be growing and has recently undergone an expansion in assets, financed primar

rage in the industry.

ofit margin did over the 2010-2012 period. The firms above-average returns net profit margin, EPS, ROA, and ROE may b

nsion in assets, financed primarily through the use of debt.

, EPS, ROA, and ROE may be attributable to the fact that it is more risky than average. A look at market ratios is helpful in a

k at market ratios is helpful in assessing risk.

Ratio Current ratio Quick (acid-test) ratio Inventory turnover Average collection period Debt ratio Times interest earned ratio Gross profit margin Net profit margin Return on total assets (ROA) Return on common equity Market/book (M/B) ratio

Industry average 1.8 0.7 2.5 37.5 days 65% 3.8 38% 3.50% 4.00% 9.50% 1.1

actual 2011 1.84 0.78 2.59 36.5 days 67% 4.0 40% 3.60% 4.00% 8.00% 1.20%

The five key aspects of performance is liquidity, activity, debt, profitability, and market. i. Liquidity The firms liquidity seems to be good. ii. iii. iv. -

Activity Inventory appears to be in good shape. The average collection period seems to have crep

Debt Indebtedness increased over the 2010-2012 period and is currently above the industry av

Profitability Profitability relative to sales in 2012 was better than the average company in the industry,

v. Market -Investors have greater confidence in the firm in 2012 than in the prior 2 years, as reflected in the

actual 2012 1.04 0.38 2.33 57 days 61.30% 2.5 33.75% 4.08% 4.36% 8% 1.20%

y, and market.

ction period seems to have crept up above that of the industry. Overall liquidity appears to be good, receivables and payables

currently above the industry average. However, Bartlett has evidently improved its income in 2012 so that it is able to meet its

verage company in the industry, although it did not match the firms 2010 performance. The firms earnings per share, return o

prior 2 years, as reflected in the price/earnings (P/E) ratio of 11.1. However, this ratio is below the industry average. In summa

receivables and payables should be examined.

so that it is able to meet its interest and fixed-payment obligations at a level consistent with the average in the industry.

arnings per share, return on total assets, and return on common equity behaved much as its net profit margin did over the 2010

dustry average. In summary, the firm appears to be growing and has recently undergone an expansion in assets, financed prim

average in the industry.

profit margin did over the 2010-2012 period. The firms above-average returns net profit margin, EPS, ROA, and ROE ma

pansion in assets, financed primarily through the use of debt.

gin, EPS, ROA, and ROE may be attributable to the fact that it is more risky than average. A look at market ratios is helpful

look at market ratios is helpful in assessing risk.

The five key aspects of performance is liquidity, activity, debt, profitability, and market. i. Liquidity The firms liquidity seems to be good. ii. iii. iv. -

Activity Inventory appears to be in good shape. The average collection period seems to have crept up

Debt Indebtedness increased over the 2010-2012 period and is currently above the industry averag

Profitability Profitability relative to sales in 2012 was better than the average company in the industry, altho

v. Market -Investors have greater confidence in the firm in 2012 than in the prior 2 years, as reflected in the price

fitability, and market.

ge collection period seems to have crept up above that of the industry. Overall liquidity appears to be good, receivables and payables should

d and is currently above the industry average. However, Bartlett has evidently improved its income in 2012 so that it is able to meet its intere

n the average company in the industry, although it did not match the firms 2010 performance. The firms earnings per share, return on total

in the prior 2 years, as reflected in the price/earnings (P/E) ratio of 11.1. However, this ratio is below the industry average. In summary, the

to be good, receivables and payables should be examined.

me in 2012 so that it is able to meet its interest and fixed-payment obligations at a level consistent with the average in the industry.

he firms earnings per share, return on total assets, and return on common equity behaved much as its net profit margin did over the 2010-2

elow the industry average. In summary, the firm appears to be growing and has recently undergone an expansion in assets, financed prima

t with the average in the industry.

h as its net profit margin did over the 2010-2012 period. The firms above-average returns net profit margin, EPS, ROA, and ROE may b

one an expansion in assets, financed primarily through the use of debt.

profit margin, EPS, ROA, and ROE may be attributable to the fact that it is more risky than average. A look at market ratios is helpful in as

rage. A look at market ratios is helpful in assessing risk.

2010 Net Profit Margin 0.059 Total Asset Turnover 2.11

Average Industry Net Profit Margin 0.054 Return on Common Equity (ROE) 0.218

Return on Total Assets (ROA) 0.12449

X
Financial Leverage Multiplier (FLM) 1.75

Total Asset Turnover 2.05

2011 Net Profit Margin 0.058 X Total Asset Turnover 2.18 Financial Leverage Multiplier (FLM) 1.75 2012 Net Profit Margin 0.049

Average Industry Net Profit Margin 0.047 Return on Total Assets (ROA) 0.126 X

Return on Common Equity (ROE) 0.221

Total Asset Turnover 2.13

Average Industry Net Profit Margin 0.041

Return on Total Assets (ROA) 0.115

(ROA) 0.115 Total Asset Turnover 2.34 Financial Leverage Multiplier (FLM) 1.85

Return on Common Equity (ROE) 0.213

Total Asset Turnover 2.15

Average Industry

X Total Asset Turnover

Return on Total Assets (ROA) 0.1107

X
Financial Leverage Multiplier (FLM) 1.67 Average Industry

Return on Common Equity (ROE) 0.185

otal Asset Turnover

Return on Total Assets (ROA) 0.100 X

Return on Common Equity (ROE) 0.169

Financial Leverage Multiplier (FLM) 1.69 Average Industry

Return on Total Assets (ROA)

Total Assets (ROA) 0.088 X

Total Asset Turnover

Return on Common Equity (ROE) 0.145

Financial Leverage Multiplier (FLM) 1.04

Home health Inc Financial Ratios Ratio Current ratio Quick (acid-test) ratio Inventory turnover Average collection period Total assets turnover Debt ratio Times interest earned ratio Gross profit margin Operating profit margin Net profit margin Return on total assets (ROA) Return on common equity Price/earnings (P/E) ratio Market/book (M/B) ratio

2011 3.25 2.5 12.8 42.60 days 1.4 0.45 4 68% 14% 8.30% 11.60% 21.10% 10.70 1.40

2012 3 2.2 10.3 31.4 days 2 0.62 3.85 65% 16% 8.10% 16.20% 42.60% 9.8 1.25

Proportion 7.60% 12% 19.53% 26.29% -42.80% -37.77% 3.75% 4.41% 17.20% 2.40% -39.65% -101.89% 8.41% 10.70%

table 3.1 pages 60 Income Statement Sales revenue Less : Cost of goods sold Gross profits Less : Operating expenses Selling , General and administrative expenses Other tax income Depreciation expense Total operating expense Operating profits Add : other Income Earning before tax and interest Less : Interest expense Net profits before taxes Less : Taxes Net profits after taxes Less : Preferred stock dividends Earnings available for common stockholders Earnings per share (EPS) Dividend per share (DPS) 2012 178909 117769 61140 12356 33572 12103 58031 3109 3147 6256 398 5858 2070 3788 0 3788 1.71 1.47

Common size income statement Sales revenue Less : Cost of goods sold Gross profits Less : Operating expenses Selling , General and administrative expenses Other tax income Depreciation expense Total operating expense Operating profits Add : other Income Less : Interest expense Net profits before taxes Less : Taxes Net profits after taxes Less : Preferred stock dividends Earnings available for common stockholders 2012 100.0% 65.8% 34.2% 6.9% 18.8% 6.8% 32.4% 1.7% 1.8% 0.2% 3.3% 1.2% 2.1% 0.0% 2.1%

Balance Sheet

2012 Assets Cash Accounts receivable inventories Other current assets Total current assets Property,plant,equipment, gross Other Non Current assets Total gross fixed assets Less : accumulated depreciation net fixed assets total assets Liabilities and stockholders equity account payable Short term debt payable Other current liabilities total current liabilities long term debt payable Deferred income tax Other non current liabilities Total non current liabilities retained earning total stockholder's equity total liabilities and stock holder's equity 7229 21163 8068 1831 38291 204960 19413 224373 110020 114353 152644

13792 4093 15290 33175 6655 16484 21733 44872 74597 0 152644

Common size balance sheet 2012 Assets Cash Accounts receivable inventories Other current assets Total current assets Property,plant,equipment, gross Other Non Current assets Total gross fixed assets Less : accumulated depreciation net fixed assets total assets Liabilities and stockholders equity account payable Short term debt payable Other current liabilities total current liabilities long term debt payable 4.7% 13.9% 5.3% 1.2% 25.1% 134.3% 12.7% 147.0% 72.1% 74.9% 100.0%

9.0% 2.7% 10.0% 21.7% 4.4%

Deferred income tax Other non current liabilities Total non current liabilities retained earning total stockholder's equity total liabilities and stock holder's equity Summary of ratio Ratio Liquidity Current ratio

10.8% 14.2% 29.4% 48.9% 0.0% 100.0%

Formula

Current assets Current liabilities

Quick (acid-test) ratio

Current assets - Inventory Current liabilities

Activity Inventory turnover Cost of goods sold Inventory

Average collection period

Accounts receivable Average sales per day

Average payment period

Accounts payable Average purchases per day

Total assets turnover

Sales Total assets

Debt Debt ratio Total liabilities Total assets

Times interest earned ratio

Earnings before interest and taxes Interest

Profitability

Gross profit margin

Gross profits Sales

Operating profit margin

Operating profits Sales

Net profit margin

Earnings available for common stockholders Sales

Profitability (cont.) Earnings available for common stockholders Number of shares of common stock outstanding

Earnings per share (EPS)

Return on total assets (ROA)

Earnings available for common stockholders Total assets

Return on common equity

Earnings available for common stockholders Book value per share of common stock

Market Market price per share of sommon stock Earnings per share

Price/earnings (P/E) ratio

Market/book (M/B) ratio

Market price per share of common stock Book value per share of common stock

2011 187510 111631 75879 12900 33377 7944 54221 21658 3323 24981 293 24688 15320 9368 0 9368 2.25 0.91

2011 100% 60% 40% 6.9% 18% 4% 29% 12% 2% 0% 13% 8% 5% 0% 5%

2011 6547 19549 7904 1681 35681 187519 17891 205410 97917 107493 143174

22862 3703 3549 30114 7099 16359 16441 39899 73161 0 143174

2011 4.6% 13.7% 5.5% 1.2% 24.9% 131.0% 12.5% 143.5% 68.4% 75.1% 100.0%

16.0% 2.6% 2.5% 21.0% 5.0%

11.4% 11.5% 27.9% 51.1% 0.0% 100.0%

2012

2011

38291 33175 1.15 38291-8068 33175 0.91

35681 30114 1.18 35681-7904 30114 0.92

117769 8068 14.6 21163 178909/365 43.18 13792 109865/365 45.82 178909 152644 1.17

111631 7904 14.12 19549 187510/365 38.05 22862 103727/365 80.44 187510 143174 1.3

78047 152644 51%

70013 143174 49%

6256 398 15.70%

24981 293 85.26%

61140 178909 34% 3109 178909 2%

75879 187510 40% 21658 187510 12%

3788 178909 2%

9368 187510 5%

3788 6.7 5.6

9368 6.8 13.77

3788 152644 2%

9368 143174 7%

3788 90 42.08

9368 90 104.1

90 1.71 52.63

90 2.25 40

90 1.17 76.92

90 0.91 98.9