Golden cup case study You were provided with the following balance sheet for Golden Cup firm for the year ended Dec 31st, 2018. Consolidated Balance sheet Golden Cup. As of Dec 31st, 2018 Assets Current Assets Cash Accounts Receivables Inventory Total Current Assets 40,000 4,000 14,000 58,000 Liabilities + Owners Equity Current Liabilities Accounts Payable 12,000 Notes Payable 6,000 Accrue Wages 1000 Total Current Liabilities 19,000 Long term debt 40,000 56,000 Fixed Assets Property, Plant, and Equipment Goodwill Total Fixed Assets 24,000 80,000 Owners' equity Common Shares Retained Earnings Total Owners equity Liabilities + O.E 40,000 39,000 79,000 138,000 Total Assets 138,000 In addition to that, you know the following facts about firm's operations throughout the year: Golden Cup revenues for the year includes the following: Domestic revenues $160,000. International revenues $80,000. Out of Golden Cup's sales, cost of sales and direct labor is 50% of annual revenues. Because of the strong competition that it faces, Golden Cup has a generous marketing plan. Golden Cup signed a contract with the marketing planet Inc. by which the marketing agency will be responsible for Golden Cup marketing for five years period started this year. The contract costs Golden Cup $100,000 that were paid up front, however the company thinks this plan will affect its sales evenly over the five years period. Golden Cup also spends $30,000 in the form of general and administrative expenses per year. Golden Cup depreciable assets historical value is $40,000 and is depreciated on a straight line basis over 10 years. Golden Cup pays interest rate of 10% on its Long-term debt outstanding. Out of the year's net income, Golden Cup is planning to repay $30,000 to its shareholders in the form of cash dividends. The company currently has 60,000 shares outstanding Question 6 6- If you are given the following information about the year ended 2017 (previous year). Total assets = $120,000, Total Equity = $70,000, Sales = 150,000, Net income = $35,000 a- Calculate Golden Cup's profitability for year ended 2017. Solution: b- Calculate Golden Cup's profitability for year ended 2018. Solution: C-Based on your knowledge of determinants of corporate profitability (DuPont identity), did any significant change happen to Golden Cup's profitability? Did it increase or decrease? What is the underlying reason behind the change, if any? Solution: Golden cup case study You were provided with the following balance sheet for Golden Cup firm for the year ended Dec 31st, 2018. Consolidated Balance sheet Golden Cup. As of Dec 31st, 2018 Assets Current Assets Cash Accounts Receivables Inventory Total Current Assets 40,000 4,000 14,000 58,000 Liabilities + Owners Equity Current Liabilities Accounts Payable 12,000 Notes Payable 6,000 Accrue Wages 1000 Total Current Liabilities 19,000 Long term debt 40,000 56,000 Fixed Assets Property, Plant, and Equipment Goodwill Total Fixed Assets 24,000 80,000 Owners' equity Common Shares Retained Earnings Total Owners equity Liabilities + O.E 40,000 39,000 79,000 138,000 Total Assets 138,000 In addition to that, you know the following facts about firm's operations throughout the year: Golden Cup revenues for the year includes the following: Domestic revenues $160,000. International revenues $80,000. Out of Golden Cup's sales, cost of sales and direct labor is 50% of annual revenues. Because of the strong competition that it faces, Golden Cup has a generous marketing plan. Golden Cup signed a contract with the marketing planet Inc. by which the marketing agency will be responsible for Golden Cup marketing for five years period started this year. The contract costs Golden Cup $100,000 that were paid up front, however the company thinks this plan will affect its sales evenly over the five years period. Golden Cup also spends $30,000 in the form of general and administrative expenses per year. Golden Cup depreciable assets historical value is $40,000 and is depreciated on a straight line basis over 10 years. Golden Cup pays interest rate of 10% on its Long-term debt outstanding. Out of the year's net income, Golden Cup is planning to repay $30,000 to its shareholders in the form of cash dividends. The company currently has 60,000 shares outstanding Question 6 6- If you are given the following information about the year ended 2017 (previous year). Total assets = $120,000, Total Equity = $70,000, Sales = 150,000, Net income = $35,000 a- Calculate Golden Cup's profitability for year ended 2017. Solution: b- Calculate Golden Cup's profitability for year ended 2018. Solution: C-Based on your knowledge of determinants of corporate profitability (DuPont identity), did any significant change happen to Golden Cup's profitability? Did it increase or decrease? What is the underlying reason behind the change, if any? Solution