1.ABC Inc. 2017 sales are $1,200,000.Operating costs (excluding depreciation) are 75% of sales.Net fixed assets are $165,000.Depreciation amounted to 11% of net fixed assets.Interest expenses are $80,000.The tax bill must be calculated using the corporate income tax table in the text, and ABC Inc. paid 12% of net income in dividends.

Prepare ABC Inc.s income statement for 2017:

ABC Inc. Income Statement

2017

Sales

Operating costs (excluding depreciation)

EBITDA

Depreciation

EBIT

Interest Expense

EBT

Taxes***

Net Income

Common Dividends

Addition to Retained Earnings

Operating Cash Flow

***For Tax Rate use the corporate tax table in chapter 2 to determine the companys tax bill, average and marginal tax rates.Use the average tax rate for this portion of the income statement.

Average tax ________

Marginal tax ________

2.The financial statements for XYZ Inc. are shown below.

Income Statement and other info:

20172016

Year-end stock price $75.00$70.00

# of shares 50003000

XYZ Inc. Income Statement

20172016

Sales900,000850,000

COGS650,000 600,000

Gross Profit250,000 250,000

Operating costs (excluding depreciation)70,00080,000

EDITDA180,000 170,000

Depreciation15,00012,000

EBIT165,000158,000

Interest Expense100,000130,000

EBT65,00028,000

Taxes19,5008,400

Net Income45,50019,600

Common Dividends4,5504000

Addition to Retained Earnings40,95015,600

Balance Sheet

Assets20172016

Cash and Cash Equivalents40,00030,000

Short term Investments4,5008,500

Accounts Receivable156,000180,000

Inventories80,00070,000

Total current assets280,500288,500

Net Fixed Assets125,000100,000

Total Assets405,500388,500

Liabilities and Equity20172016

Accounts Payable15,00012,500

Accruals18,50014,000

Notes Payable9,0006,000

Total Current Liabilities42,50032,500

Long term debt123,000176,950

Total Liabilities165,500209,450

Common Stock160,000140,000

Retained Earnings80,00039,050

Total Common Equity240,000179,050

Total Liabilities and Equity405,500388,500

a.Find all of the ratios below:

2017IA

Liquidity Ratios

Current Ratio3.5

Quick Ratio2

Asset Management Ratios

Inventory Turnover25.39

Days Sales Outstanding55.08

Total Assets Turnover2.7

Debt Ratios

Debt Ratio35%

TIE Ratio6.5

Debt to Equity Ratio

Profitability Ratios

Profit Margin12%

Return on Assets13.5%

Return on Equity15%

Market Ratios

EPSN/A

P/E ratio14.78

b.Write a synopsis on how this company compares with the industry in each section of ratios.

c.Perform a DuPont analysis for XYZ Inc.

ROE = PM*TA Turnover*Equity Multiplier

2017

d.Explain the results in part c.