compute using the balance sheet provided

Last Year $64,000 42,000 22,000 Heritage Antiquing Services Comparative Income Statement and Reconciliation (dollars in thousands) This Year Sales ....... $66.000 Cost of goods sold ... 43,000 Gross margin . . . . . . . 23,000 Selling and administrative expenses: Selling expenses .. 11,500 Administrative expenses ............. 7.400 Total selling and administrative expenses.. 18.900 Net operating income ....... 4,100 Interest expense .. 800 Net income before taxes... 3,300 Income taxes ........ 1.320 Net income.. 1,980 Dividends to preferred stockholders Net income remaining for common stockholders 1.920 450 Dividends to common stockholders .... Net income added to retained earnings. 1.470 32,610 Retained earnings, beginning of year ... $34,080 Retained earnings, end of year ....... 11,000 7,000 18,000 4,000 800 3,200 1.280 1.920 400 60 1,520 450 1,070 31,540 $32,610 Antiquing Services for the fiscal year ending EXERCISE 1: Financial Ratios for Common Stockholders comparative financial statements for Heritage Antiquine Services for the fiscal yea wecember 31 appear on the following page. The company did not issue any preferred stock during the year. A total of 800 thousands uring the year. A total of 800 thousand shares of common stock were vustanding. The interest rate on the bond povable was 14% the income tax rate the dividend per share of common stock w per share of common stock was $0.75. The market value of the company's common stock at the end of the vear was $26. All of the company's sales are on account 9,000 Heritage Antiquing Services Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Cash. $ 1,080 $ 1,210 Accounts receivable, net.... 9,000 6,500 Inventory 12,000 10.600 Prepaid expenses.... 500 600 Total current assets . . . . . . . . . . 22.680 18,810 Property and equipment: Land ..... 9,000 Buildings and equipment, net......... 36,800 38.000 Total property and equipment .......... 45,800 47,000 $65,810 Total assets ......... $68,480 Liabilities and Stockholders' Equity Current liabilities: Accounts payable ... $18,500 $17,400 Accrued payables ......... 900 700 100 Notes payable, short term .... Total current liabilities 19,400 18,200 Long-term liabilities: Bonds payable .. 8.000 8,000 Total liabilities 27,400 26,200 Stockholders' equity: Preferred stock .. 1,000 1,000 Common stock ........ 2,000 2,000 Additional paid-in capital. 4,000 4,000 Total paid-in capital 7,000 7,000 Retained earnings . . . . . . . . . ... 34,080 32,610 Total stockholders' equity. 41,080 39,610 Total liabilities and stockholders' equity ..... $68,480 $65,810 Part IV. Use the traditional DuPont analysis to decompose the return on stockholder's equity (ROE) into its three components, and comment on Heritage Antiquing Services' performance. (16 points)