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Consider the following information for HandyCraft Stores for 2017 and 2018: 2017 2018 Total assets $ 59,500,000 $ 56,430,000 Noninterest bearing current liabilities 4,400,000 4,950,000
| Consider the following information for HandyCraft Stores for 2017 and 2018: | |||||||||
| 2017 | 2018 | ||||||||
| Total assets | $ 59,500,000 | $ 56,430,000 | |||||||
| Noninterest bearing current liabilities | 4,400,000 | 4,950,000 | |||||||
| Net income | 3,650,000 | 4,950,000 | |||||||
| Interest expense | 2,420,000 | 2,975,000 | |||||||
| Sales | 66,000,000 | 96,250,000 | |||||||
| Tax rate | 40% | 40% | |||||||
| Required | |||||||||
| Calculate ROI for both years. | |||||||||
| 2017 | |||||||||
| NOPAT = | + [ | ( | )] = | ||||||
| Invested capital = | = | ||||||||
| ROI = | = | ||||||||
| 2018 | |||||||||
| NOPAT = | + [ | ( | )] = | ||||||
| Invested capital = | = | ||||||||
| ROI = | = | ||||||||
| b. Break ROI down into profit margin and investment turnover. | |||||||||
| 2017 | |||||||||
| Profit margin | Investment turnover | ||||||||
| = | |||||||||
| 2018 | |||||||||
| Profit margin | Investment turnover | ||||||||
| = | |||||||||
| c. Comment on the change in financial performance between 2017 and 2018. | |||||||||
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The ASQ Auditing Handbook
Authors: J. P. Russell
3rd Edition
0873896661, 978-0873896665
