AGEC $424$ EXAM 1 Spring 2013 (167 points)
Name___________________________
Show your work for all questions (even if I forgot to put a reminder on the question).
Logically correct work must be shown to receive credit for your answers.
I. Computron Industries: Balance Sheet as of December 31 ($ thousands)
Cash $ 100 Accts payable $ 150
AR 400 Notes Payable 150
Inventories 600 Accruals 100
Total CA $1,100 Total CL $ 400
Net FA $ 500 Long-term debt 500
Total Assets $1,600 Common stock 400
Retained earnings 300
Total Equity $ 700
Total L & OE $ 1,600
Computron Industries: Income Statement for Year Ended December 31($ thousands)
Sales $ 5,000
COGS (3,500)
Other expenses (1,000)
Deprec. (250)
EBIT $ 250
Interest exp. (50)
EBT $ 200
Taxes (30%) (60)
Net income $ 140
Other data for Computron Industries:
Dec. 31 stock price: $15
Number of shares outstanding 140 thousand (the numbers above are also in thousands)
Dividends per share $0.50
Lease payments $20 (Thousand)
You may remove this page, but put your name at the top of page 2.
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Name_______________________
1. (38 points) Calculate ratios for Computron Industries for use in comparison to the following
industry averages. Show your work in the Computron Industries box.
Ratio Industry
average
Computron Industries
If you don’t show your work in this
column you don’t get the points.
Evaluate briefly and then support
your statement by comparing to
the industry average.
Current Ratio 1.6x Evaluate liquidity:
Quick Ratio 0.6x
Debt ratio
(TL/TA)
50% Evaluate debt level:
Times Interest
Earned
7.5x
Inventory
turnover
8x Evaluate asset management
Days sales
outstanding
40 days
Fixed Asset
turnover
5x
Total assets
turnover
2.0x
Profit margin
(ROS)
3.0% Evaluate profitability:
Return on total
assets (ROA)
6%
Return on
equity (ROE)
12%
Price-Earnings 13x Evaluate market ratios:
Market to Book 2.0x
Acts pay. Def. 20 da. 15.4 da. Don’t evaluate.
Use the above data for questions 2 through 5.
2. (12 points) Construct the extended Du Pont equation for both Computron and for the industry. Then
analyze the component breakdown of the company’s ROE in comparison to the industry (say something
about each component).
3. (4 points) Which is more responsible for the deviation of Computron’s ROE from the industry average:
cost control, asset management, or debt management? Explain.
4. (8 points) Show a side by side comparison of the cash conversion cycle for Computron with the
industry. Use the CCC to analyze working capital management for Computron in comparison to the
industry (say something about each component). Say which is best and why?
5. (4 points) Based on the ratios and information in questions 1-4, point out red flags and major successes
