This assignment is based on the financial statements and notes for Alpha Corporation

presented in the accompanying excel sheet and additional information as follows:

Alpha's competitors use FIFO for inventory costing.

The market value of Alpha Corporation at December 31, 2018 was $3,000,000.

Rental revenues were derived from a short-term lease of an unused portion of the Building which will be put back to use after the end of the lease.

Using the financial statements and notes and the additional information above, provide the

following as a basis for a future comparison of Alpha Corporation to competitor ratios and

industry benchmarks:

1. A decomposition of ROE using a 5-way DuPont Analysis showing all the components

(e.g., interest burden, tax burden, etc) (10 points)

2. A decomposition of ROE into operating return and nonoperating return and the

components comprising each (e.g., NOPM, NOAT, FLEV etc.) (10 points)

3. The probability of bankruptcy of the corporation as of December 31st2018 using the

Altman Model showing all components and the Z-score using the NORMDIST function. (5

points)

4. A summary of specific results from your analysis that you would be especially interested

in comparing Alpha Corporation to its competitors in a future analysis. (5 points)

5. What is Alpha's bad debt expense for 2018. Would you consider this significant? Explain

briefly. (5 points)

Income Statement for the Year ended Dec 31 REVENUES AND GAINS Sales Gain on Sale of Equipment Rental Revenue Dividend Revenue Total Revenues and Gains EXPENSES, LOSSES, AND DEDUC'HONS Cost of Goods Sold (Including Depreciation and Amortization} Selling and Administration Expenses (Including Depreciation and Amortization and Bad Debt Expense} Warranty Expense Interest Expense Loss on Sale of Marketable Equity Securities Income Tax Expense Total Expenses, Losses, and Deductions Consolidated Net Income Less Dividends Declared Increase in Retained Earnings for 2018 Retained Earnings, December 31, 2017 Retained Earnings, December 31, 2018 " 2013 4,102,000 3,000 240,000 3,000 4,353,000 2,530,000 1,102,205 45,300 1 55,995 3,000 1 50,000 4,053,000 300,000 {119,500} 130,500 277,000 457,500 Alp ha Corporation Balance sheet as at Dec 31 ASSEE Current Assets Cash Marketable securities [Note 11 Accounts receivable - Net [Note 2} Inventories [Note 31 Prepayments Total current assets Investments [Equity Method! Investment in Thayer Corporation Investment in Hitchcock Corporation Investment in Davis Corporation Total Investments Property, Plant, and Equipment [Note 4} Land Building Equipment Leasehold Total Plant Assets at Cost Less Accumulated Depreciation and Amortization Total Plants Assets - Net lntangib les Goodwill - Net Total Assets LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Note Payable [Note 51 Accounts Payable Rental Fees Received in Advance Estimated Warranty Liability Interest Payable on Notes Dividends Payable Income Taxes Payable - Cu rrent Mortgage Payable - Current Position Capitalized Lease Obligation - Current Portion Total Current Liabilities Noncurrent Liabilities Bonds Payable Mortgage Payable [Note 61 Capitalized Lease Obligation [Note 71 Deferred Tax Liability Total Noncurrent Liabilities Total Liabilities 20 18 273,000 141,000 1,509,500 1,525,315 32,000 3,435,915 37,000 135,000 293,000 520,000 32,000 343,000 1,343,413 105,035 2,379,454 {420,354} 2,453,500 35,000 5,500,515 200,000 723,700 53,000 73,500 2,000 30,000 150,000 37,333 10,000 1,299,533 1,931,143 243,550 45,229 145,000 2,355,932 3,555,515 2017 240,000 125,000 1,431,200 1,257,251 23,000 3,031,451 92,000 120,000 215,000 427,000 32,000 343,000 497,313 105,035 1,523,354 {333,354} 1,145,000 35,000 4,539,451 100,000 555,100 45,000 75,200 1,500 25,000 140,000 37,333 10,000 1,101,133 1,104,550 252,554 52,054 130,000 1,549,273 2,550,451 Shareholders' Equity Common Stock, $10 par Value 1,650,000 1,000,000 Additional Paid-In Capital - Common 783,600 830,000 Accumulated Other Comprehensive Income: Unleaized Loss on Marketable Securities (21,000) (25,000) Unrealized Loss on Investments in Securities (21,000) (16,000) Retained Earnings 457,500 277,000 Total 2,849,100 2,066,000 Less Treasury Stock (14,200) (27,000) Total Shareholders' Equity 2,834,900 2,039,000 Total Liabilities and Shareholders' Equity 6,500,515 4,689,461