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, 2019 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, accounting policies 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. Compute cash conversion cycle. What will be the change in cash if the company reduced its the cash conversion cycle by 1 day? (5 points)

4. Compute PPE turnover and percentage of PPE used up. Comment briefly. (5 points)

5. 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)

6. What is Alpha's bad debt expense for 2019. Would you consider this significant? Explain briefly. (5 points)

Alpha Corporation S S Balance sheet as at Dec 31 2019 2018 ASSETS Current Assets Cash 278,000 240,000 Marketable securities (Note 1) 141,000 125,000 Accounts receivable - Net (Note 2) 1,509,600 1,431,200 Inventories (Note 3) 1,525,315 1,257,261 Prepayments 32,000 28,000 Total current assets 3,485,915 3,081,461 Investments (Equity Method) Investment in Thayer Corporation 87,000 92,000 Investment in Hitchcock Corporation 135,000 120,000 Investment in Davis Corporation 298,000 215,000 Total Investments 520,000 427,000 Property, Plant, and Equipment (Note 4) Land 82,000 82,000 Building 843,000 843,000 Equipment 1,848,418 497,818 Leasehold 106,036 106,036 Total Plant Assets at Cost 2,879,454 1,528,854 Less Accumulated Depreciation and Amortization (420,854) 383,854 Total Plants Assets - Net 2,458,600 1,145,000 Intangibles Goodwill - Net 36,000 36,000 Total Assets 6,500,515 4,689,461 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Note Payable (Note 5) 200,000 100,000 Accounts Payable 723,700 666,100 Rental Fees Received in Advance 58,000 46,000 Estimated Warranty Liability 78,600 75,200 Interest Payable on Notes 2,000 1,500 Dividends Payable 30,000 25,000 Income Taxes Payable - Current 160,000 140,000Income Taxes Payable - Current 160,000 140,000 Mortgage Payable - Current Position 37,383 37,383 Capitalized Lease Obligation - Current Portion 10,000 10,000 Total Current Liabilities 1,299,683 1,101,183 Noncurrent Liabilities Bonds Payable 1,931,143 1,104,650 Mortgage Payable (Note 6) 243,560 262,564 Capitalized Lease Obligation (Note 7) 46,229 52,064 Deferred Tax Liability 145,000 130,000 Total Noncurrent Liabilities 2,365,932 1,549,278 Total Liabilities 3,665,615 2,650,461 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 $ Income Statement for the Year ended Dec 31 2019 REVENUES AND GAINS Sales 4,102,000 Gain on Sale of Equipment 3,000 Rental Revenue 240,000 Dividend Revenue 8,000 Total Revenues and Gains 4,353,000 EXPENSES, LOSSES, AND DEDUCTIONS Cost of Goods Sold (Including Depreciation and Amortization) 2,580,000 Selling and Administration Expenses (IncludingSelling and Administration Expenses (Including Depreciation and Amortization and Bad Debt Expense) 1,102,205 Warranty Expense 46,800 Interest Expense 165,995 Loss on Sale of Marketable Equity Securities 8,000 Income Tax Expense 150,000 Total Expenses, Losses, and Deductions 4,053,000 Consolidated Net Income 300,000 Less Dividends Declared (119,500 Increase in Retained Earnings for 2019 180,500 Retained Earnings, December 31, 2018 277,000 Retained Earnings, December 31, 2019 457,500Accounting Policies: "" Basis of Consolidation: Consolidated its statements with those of Harvard Corporation [100% owned subsidiary, acquired January 2, 2017} "" Marketable Securities: The rm classies marketable securities as avaialble for sale and measures them at fair value "" Accounts Receivable: Accounts for uncollectible accounts using the allowance method "" Inventories: The rm uses LIFO assumption for inventories "" Investments: Investments of less than 20% ofthe outstanding common stock ofother companies as avaialable for sale and measures them at fair value lnvestm enU of 205096 of the ouUtanding common stock of afliates are accounted for using the equity method "" Property Plant and Equipment: Depreciation for buildings, equipment, and leaseholds is calculated using the straightline method and accelerated method for incometax reporting "" Measure interest expense on longterm debt using the effective interest method ** Provides for deferred income taxes arising from temporary differences between book and taxable income Notes: "" the balance sheet presents marketable equity securities, all classied as available for sale, at fair value, which is less than acquisition cost by $25,000 on December 31, 2018, and $21,000 on December 31, 2019. Alpha Corporation sold marketable equity securities costing $35,000 during 2019. [NOTE 1] "" the balance sheet presents accounts receivable net of an allowance for uncollectibles of $128,800 on December 31, 2018, and $210,400 on December 31, 2019. Alpha Corporation wrote off a total of $63,000 of accounts receivable as uncollectible during 2019. [NOTE 2] "" the valuation of inventories on a FIFO basis exceed the amounts on a LIFO basis by $430,000 on December 31, 2018, and $410,000 on Decemer 31, 2019. [NOTE 3] ** Alpha Corporation sold equipment with a cost of $23,000 and a carrying value of $4,000 during 2019. This was the only disposition of property, plant, and equipment during the year. [NOTE 4] " Alpha Corporation paid at maturity a 90day, 9% note with a face amount of $100,000 with interest on January 30, 2019. On December 1, 2019 Alpha Corporation borrowed $200,000 from its local bank, promising to repay the principal plus interest at 12% in six months. [NOTE 5] "" Mortgage payable represents a building mortgage requiring equal installment payments of $40,000 on December 31 of each year. The loan underlying the mortgage bears interest of 7%, compounded annually. [NOTE 6} "" The capitalized lease obligation represents a 20year, noncancelable lease on certain equipment. The lease requires annual payments, in advance of $10,000 on January 2 of each year. Alpha Corporation will make the last lease payment on January 2, 2025. Alpha Corporation capitalizes the lease at its borrowing rate of 8%. [NOTE I}