Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Textbook Question
Chapter 5, Problem 5.12E
Profitability Analyses. Use the following excerpt from Dragonfly Corporation’s balance sheet and its income statement to compute Dragonfly’s profit margin and return on assets for 2018 and 2019 Comment on Dragonfly's profitability and changes in profitability from 2018 to 2019. Dragonfly's total assets at the end of 2017 were $157,534 million.
| Assets (dollars in millions) | 2019 | 2018 |
| Current Assets | ||
| Cash and Cash Equivalents | $ 13,420 | $ 19.355 |
| Marketable Securities | 7,623 | 2.394 |
| Accounts Receivable Trade, Net | 22,120 | 20,872 |
| Inventories | 47,415 | 45,630 |
| Prepaid Expenses and Other Receivables | 1,312 | 1,264 |
| Total Current Assets | 91,890 | 89.515 |
| Property, Plant, and Equipment, Net | 67,045 | 65.762 |
| Other Assets | 3,773 | 3,770 |
| Total Assets | $162,708 | $159,047 |
| (in millions) | 2019 | 2018 |
| Sales | $ 63,762 | $ 61,890 |
| Cost of Goods Sold | 33,092 | 30,096 |
| Gross Profit | 30.670 | 31,794 |
| Selling. General, and Administrative Expenses | 15,335 | 15,897 |
| Research and Development Expense | 7,052 | 7,844 |
| Interest Expense | 145 | 142 |
| Earnings Before Taxes | 8,138 | 7,911 |
| Income Tax Expense | 2,848 | 2,769 |
| Net Income | $ 5,290 | $ 5,142 |
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Students have asked these similar questions
What are the firm’s net profit margins for 2018 and 2019?
Income Statements ($ in millions)
Balance Sheets ($ in millions)
2018
2019
Assets
2018
2019
Sales Revenue
$2,580
$2,865
Cash
$70
$50
Less: Cost of goods sold
$1,060
$1,500
Short-Term investments
$35
$9
Less: Operating Expenses
$105
$162
Accounts rec.
400
460
Less: Depreciation
$85
$80
Inventory
490
556
Earnings before interest and taxes
$1,330
$1,123
Total Current Assets
$995
$1,075
Less: Interest paid
$350
$380
Net fixed assets
1890
1,910
Taxable Income
$980
$743
Less: Taxes (40%)
$392
$297
Total assets
$2,885
2,985
Net income
$588
$446
Liabilities and Owner's Equity
Dividends (45%)
$265
$201
2018
2019
Additions to Retained Earnings
$323
$245
Accounts payable
$240
$210
Accruals
$20
$20
Notes payable
65
74
Total Current…
Ratio Analysis
Based on the Income Statement and Balance Sheet, complete the table below.
Then comment on the liquidity, profitability, leverage, asset management and market value.
Analysis of Financial Data (Table with ratios)
Ratio Analysis
2021
Est.
2020
2019
Industry Average
Liquidity Ratios
Current Ratio (times)
4.2
Quick Ratio (times)
2.1
Asset Management Ratios
Average sales/day
9
Inventory Turnover Ratio (times)
9
Days Sales Outstanding (days)
36
Fixed Assets Turnover Ratio (times)
3
Total Asset Turnover Ratio
1.8
Debt Management Ratios
Total Debt to Total Assets (%)
40
Times Interest Earned (times)
6
Debt to Equity Ratio (%)
1
Profitability Ratios…
Return on Assets Ratio and Asset Turnover Ratio
Northern Systems reported the following financlal data (in millions) In its annual report:
2018
2019
Net Income $9,050 $7.500
Net Sales
52,350 37,200
Total Assets 58,734 68,128
If the company's total assets are $55,676 in 2017, calculate the company's:
(a) return on assets (round answers to one decimal place - ex: 10.79%6)
(b) asset turnover for 2018 and 2019 (round answers to two decimal places)
2018
2019
a. Return on Assets Ratio
96
96
b. Asset Turnover Ratio
Check
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Chapter 5 Solutions
Intermediate Accounting
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