QUESTION ABS Company and CDS Company are all household appliance companies. They have similar products and share the same market. Their balance sheets and income statements are listed below. INSTRUCTION 1. Prepare the common size balance sheet and income statement for ABS and CDS company respectively 2. Please figure out corresponding financial ratios for the two companies for the year 2017 and 2018 respectively 3. What can you get from the common size balance sheets and the income statements of the two companies ? 4. Please evaluate liquidity, solvency, profitability and assets utilization for the two companies respectively 5. Please make DuPont Analysis for the two companies respectively. (Year 2017 and 2018) 6. Please describe the advantages and disadvantages of the financial position and operating results for the two companies respectively. If possible, show your opinions of the improvement of their assets structures and capital structures to help them get a better financial position 7. According to materials you get, which company do you choose to invest in (or rather not choose any of them? Please give your reasons. (Millions of 5) YEAR 2017 4,986 11.073 2006 380 18.525 YEAR 2016 5,012 6.400 2.036 300 650 14 000 8.800 0 34.000 9,600 23.600 23.450 41.975 The CDS COMPANY Balance Sheet YEAR 2018 Current Assets Cash and Cash Equivalents 4,875 Accounts Receivable (net) 12,239 Inventories 2.147 Prepaid Expenses 600 Total Current Assets 19.861 Long-term Investments 1,874 Net property, plant and Equipment 15,000 Net intangible Assets 8.000 Other Assets 1.224 Total Long-term Assets 26.108 Total Assets 45.969 Current Liabilities Short-term Debt 2,011 Accounts Payable 1,083 Sales Taxes Payable 926 Income Taxes Payable 858 Accrued Wages Payable 346 Dividends Payable 154 Short-Term Notes Payable 2.120 Total Current Liabilities 2498 Long-Term Liabilities Long-Term Bonds Payable 8.882 Mortgage Payable 2.300 Total Long-Term Liabilities 11.182 Total Liabilities 1.8680 Owners' Equity Owner's Investment 19,665 Retained Eamings 2.624 Total Owners' Equity 2.7289 Total Liabilities and Owners' Equity 45.242 3,025 1013 874 651 357 104 3.000 4.045 1.908 1,023 990 324 1.200 6,488 1300 Z.ES 5,638 43 16.982 19.470 30.665 24.983 41.975 13,665 2.212 17.878 37.348 The CDS COMPANY Income Statement YEAR 2018 Sales 29,105 Cost of Goods Sold 18.867 Gross Profit on Sales 10.238 Selling, General and Administrative Expenses 2,666 Research and Development Expenses 1.802 Other Expenses 1,008 Income from Operations Other Inconic and Expenses 598 Income Before Interest and Taxes 4,164 Interest Expenses 8.46 Income Before Taxes 3,318 Provision for Taxes 858 Net Income 2010 YEAR 2016 29,924 17.094 12.30 2.808 2,000 LARO YEAR 2017 28,184 17.277 10.907 2.986 1.96 1.211 4,724 1.100 3.624 764 2,860 651 2209 1.200 5.142 2.090 3,052 623 (Millions of YEAR 2017 3.990 4.073 4,000 2.246 123 2,650 16.940 8.800 2010 20.400 YEAR 2016 4.212 4219 4,509 2022 15.582 2.802 16.500 9.570 10 45.505 The ABS COMPANY Balance Sheet YEAR 2018 Current Assets Cash and Cash Equivalents 3400 Accounts Receivable (net) 6087 Inventories (net) 2652 Prepaid Expenses Total Current Assets 16.212 Long-term Investments 2.763 Net property, plant and Equipment 17050 Net intangible Assets 8030 Other Assets 1002 Total Long-term Assets 28.852 Total Assets 45.065 Current Liabilities Short-term Debit 10011 Accounts Payable 6.085 Sales Taxes Payable 1087 Income Taxes Payable 1230 Accrued Wages Payable 1492 Dividends Payable Total Current Liabilities 20.232 Long-Term Liabilities Long-Term Bonds Payable 9.482 Mortgage Payable Total Long-Term Liabilities 12.782 Total Liabilities 33,021 Damers' Equity Owner's Investment 8.605 Retained Earnings 2439 Total Owners' Equity 12.044 Total Liabilities and Owners' Equity 45.65 9020 6.890 5210 100 1200 1320 1512 17.952 1,500 212 10488 5000 17001 10.200 2.000 19.00 35040 25.618 3.0 so 10.752 $5.802 45.50 The ABS COMPANY Income Statement YEAR 2017 32.184 16092 16092 YEAR 2016 28.940 15.76 13.154 YEAR 2018 31098 14,542 16,351 4,026 3.802 654 8.069 4.006 21 Sales Cost of Goods Sold Gross Profit on Sales Selling. General and Administrative Expenses Research and Development Expenses Other Expenses Income from Operations Other Income and Expenses Income Before Interest and Taxes Interest Expenses Income Before Taxes Provision for Taxes Net Income 602 7,839 2357 532 1.230 4.352 7873 310 7.563 1961 5,603 1.130 4.28 145