1. The Montanya Products Business was started in 2011 The founders (Paul and Jane Montanya) are still worried about the ventures liquidity position and the quantity of cash being used. Following are income statements and balance sheets for the Montanya Products Company for 2012 and 2013.

MONTANYA PRODUCTS COMPANY

Income Statement 2012 2013

Net Sales $900,000 $1,600,000

Cost of Goods Sold 540,000 900,000

Gross Profit 360,000 700,000

Marketing 90,000 150,000

General & Administrative 250,000 250,000

Depreciation 40,000 40,000

EBIT -20,000 260,000

Interest 45,000 60,000

Earnings Before Taxes -65,000 200,000

Income Taxes 0 25,000

Net Income (Loss) -$65,000 $175,000

Balance Sheet 2012 2013

Cash $50,000 $20,000

Accounts Receivables 200,000 280,000

Inventories 400,000 500,000

Total Current Assets 650,000 800,000

Gross Fixed Assets 450,000 540,000

Accumulated Depreciation -100,000 -140,000

Net Fixed Assets 350,000 400,000

Total Assets $1,000,000 $1,200,000

Accounts Payable $130,000 $160,000

Accruals 50,000 70,000

Bank Loan 90,000 100,000

Total Current Liabilities 270,000 330,000

Long-Term Debt 300,000 400,000

Common Stock ($.05 par) 150,000 150,000

Additional Paid-in-Capital 200,000 200,000

Retained Earnings 80,000 120,000

Total Liab. & Equity $1,000,000 $1,200,000

E. Calculate the net profit margin in 2012 and 2013 and the sales-to-total-assets ratio using yearend data for each of the two years.

Net profit margin 2012:

Net profit margin 2013:

Sales-to-total-assets 2012:

Sales-to-total-assets 2013:

6. Use your calculations from Part C to determine the rate of return on assets in each of the two years for the Montanya Products.

ROA = (Net profit / sales) x (Net sales / Ave. total assets)

7. Calculate the percentage growth in net sales from 2012 to 2013. Compare this with the percentage change in total assets for the same period.