7. Class Activity-Mini-case - Financial Statement Analysis Tikes M. MANEN2 Sinhala RATAIAT 5 CASIO Question 1 (8 pts.) The following data are from the financial statements of DDT company in Smillions) Table 1: Financial statements data Income statement data for 2020: Net sales $4,300 Cost of Goods sold Formula 2.500 Operating expenses 850 NOPAT = EBIT (1-T) Interest expense 220 RNOA = NOPAT/ Avg. NOA Tax rate 30% Balance sheet data: NOAT= Sales/Avg. NOA Total equity, Dec. 31, 2019 $ 4,250 NOPM = NOPAT/Sales Total equity, Dec. 31, 2020 4,450 Operating assets, Dec. 31, 2019 5,840 ROE NI/ Avg. Assets Operating assets, Dec. 31, 2020 5,540 Total assets, Dec. 31, 2019 Avg. Assets/ Avg. Equity 7,300 Total assets, Dec. 31, 2020 7,950 ROE NI/ Sales x Operating liabilities, Dec. 31, 2019 1,600 Sales/Avg. Assets x Operating liabilities, Dec. 31, 1,500 2020 Avg. Assets/ Avg. Equity Abs RCL Required? (a) Compute the Return on Net Operating Assets (RNOA) of DDT Company in 2020. Suppose that the industry average RNOA is 25%. Discuss the profitability position of the company compared to the industry (3 pts.). (b) Compute the Net-operating Asset turnover (NOAT) of DDT Company in 2020. Assume that the industry average NOAT is 1.2x. Evaluate the asset management performance of the company compared to the industry (1 pt.) (c) Compute the Net-operating Profit margin (NOPM) of DDT Company in 2020. Suppose that the NOPM of the company were 12% and 15% in 2018 and 2019 respectively. What is your conclusion about the profitability of the company? (2 pts). (d) Calculate the ROE of the company in 2020 using a two-stage DuPont analysis. Explain the reasonable conclusion you might make about the profitability of the company if the industry average ROE is 20% (2 pts.). 7. Class Activity-Mini-case - Financial Statement Analysis Tikes M. MANEN2 Sinhala RATAIAT 5 CASIO Question 1 (8 pts.) The following data are from the financial statements of DDT company in Smillions) Table 1: Financial statements data Income statement data for 2020: Net sales $4,300 Cost of Goods sold Formula 2.500 Operating expenses 850 NOPAT = EBIT (1-T) Interest expense 220 RNOA = NOPAT/ Avg. NOA Tax rate 30% Balance sheet data: NOAT= Sales/Avg. NOA Total equity, Dec. 31, 2019 $ 4,250 NOPM = NOPAT/Sales Total equity, Dec. 31, 2020 4,450 Operating assets, Dec. 31, 2019 5,840 ROE NI/ Avg. Assets Operating assets, Dec. 31, 2020 5,540 Total assets, Dec. 31, 2019 Avg. Assets/ Avg. Equity 7,300 Total assets, Dec. 31, 2020 7,950 ROE NI/ Sales x Operating liabilities, Dec. 31, 2019 1,600 Sales/Avg. Assets x Operating liabilities, Dec. 31, 1,500 2020 Avg. Assets/ Avg. Equity Abs RCL Required? (a) Compute the Return on Net Operating Assets (RNOA) of DDT Company in 2020. Suppose that the industry average RNOA is 25%. Discuss the profitability position of the company compared to the industry (3 pts.). (b) Compute the Net-operating Asset turnover (NOAT) of DDT Company in 2020. Assume that the industry average NOAT is 1.2x. Evaluate the asset management performance of the company compared to the industry (1 pt.) (c) Compute the Net-operating Profit margin (NOPM) of DDT Company in 2020. Suppose that the NOPM of the company were 12% and 15% in 2018 and 2019 respectively. What is your conclusion about the profitability of the company? (2 pts). (d) Calculate the ROE of the company in 2020 using a two-stage DuPont analysis. Explain the reasonable conclusion you might make about the profitability of the company if the industry average ROE is 20% (2 pts.)
