Question 2 (Total marks= 20) Adams Corporation manufactures fasteners. The companys income statements for three years are indicated in Exhibit 1. The balance Sheets for the same period are shown in Exhibit 2. Exhibit 1 ADAMS CORPORATION Income Statement 2017 2018 2019 Sales (all on credit) $1,500,000 $1,800,000 $2,160,000 Cost of goods sold 950,000 1,120,000 1,300,000 Gross profit 550,000 680,000 860,000 Selling and administrative expense 380,000 490,000 590,000 Operating profit 170,000 190,000 270,000 Interest expense..... 30,000 40,000 85,000 Net income before taxes 140,000 150,000 185,000 Taxes 46,120 48,720 64,850 Net Income.. $93,880 $101,280 $120,150 Shares 40,000 40,000 46,000 Exhibit 2 ADAMS CORPORATION Balance Sheet Assets 2017 2018 2019 Cash $20,000 $30,000 $20,000 Marketable securities 30,000 35,000 50,000 Accounts receivable 150,000 230,000 330,000 Inventory 250,000 285,000 325,000 Total Current Assets 450,000 580,000 725,000 Net Plant and equipment 550,000 720,000 1,169,000 Total Assets.. $1,000,000 $1,300,000 $1,894,000 Liabilities & Equity Accounts payable. $100,000 $225,000 $200,000 Notes payable (bank) 100,000 100,000 300,000 Total Current liabilities 200,000 325,000 500,000 Long-term liabilities 250,000 331,120 550,740 Total liabilities 450,000 656,120 1,050,740 Common stock ($10 par) 400,000 400,000 460,000 Capital paid in excess of par. 50,000 50,000 80,000 Retained earnings 100,000 193,880 303,260 Total stockholders equity.. 550,000 643,880 843,260 Total liabilities and stockholders equity $1,000,000 $1,300,000 $1,894,000 (a) Using the Du Pont System, describe the changes in the return on assets from year to year and analyze the factors affecting the ROA. (8 marks)