Question :
51) Income Statement
CFM Majestic Inc.
Years 1 & 2 ($000,000s)
Year 1
Year : 1907276
51) Income Statement
CFM Majestic Inc.
Years 1 & 2 ($000,000s)
|
|
Year 1 |
Year 2 |
|
Sales |
381.9 |
416.3 |
|
COGS |
244.9 |
278.9 |
|
SG&A |
59.7 |
63.8 |
|
Depreciation |
13.8 |
15.4 |
|
R & D |
5.3 |
4.3 |
|
EBIT |
58.2 |
53.9 |
|
Interest Expense |
7.3 |
7.9 |
|
Earnings before Income Tax |
50.9 |
46.0 |
|
Income Taxes |
17.3 |
14.8 |
|
Net Income |
33.6 |
31.2 |
Referring to the CFM Majestic financial statements, is the change between Year 1 and Year 2 in Total Asset Turnover important in explaining the change in ROA?
A) No
B) Yes
52) Income Statement
CFM Majestic Inc.
Years 1 & 2 ($000,000s)
|
|
Year 1 |
Year 2 |
|
Sales |
381.9 |
416.3 |
|
COGS |
244.9 |
278.9 |
|
SG&A |
59.7 |
63.8 |
|
Depreciation |
13.8 |
15.4 |
|
R & D |
5.3 |
4.3 |
|
EBIT |
58.2 |
53.9 |
|
Interest Expense |
7.3 |
7.9 |
|
Earnings before Income Tax |
50.9 |
46.0 |
|
Income Taxes |
17.3 |
14.8 |
|
Net Income |
33.6 |
31.2 |
Referring to the CFM Majestic financial statements, pick the most informative explanation for why ROA fell.
A) ROA fell because both gross margin fell and Selling, General & Admin expenses as a percentage of sales fell.
B) ROA fell because Total Asset Turnover fell.
C) ROA fell because the Equity Multiplier fell and because Cost of Goods Sold over Sales rose.
D) ROA fell because Net Income grew more slowly than Total Assets.
E) ROA fell mainly because gross margin fell.
Tootsie Roll Industries, Inc. has been engaged in the manufacture and sale of candy since 1896. Its products are sold under the familiar brand names Tootsie Roll, Tootsie Roll Pops, Charms, Blow Pops, Cella's, Mason Dots and Mason Crows. Tootsie Roll operates four plants in Illinois, New York, Tennessee and Mexico. Tootsie Roll is traded on the New York Stock Exchange and maintains its head office in Chicago, Illinois.
Tootsie Roll's financial statements for Year 5 and Year 6 are provided below.
Tootsie Roll Industries Inc.
Balance Sheet
As of December 31, Year 6 ($000s)
|
|
Year 6 |
|
Cash & marketable securities |
36,758 |
|
Accounts receivable |
16,207 |
|
Inventories |
22,927 |
|
Prepaid expenses |
2,037 |
|
Total Current Assets |
77,929 |
|
Net Fixed Assets |
32,099 |
|
Other assets |
49,674 |
|
Total Assets |
159,702 |
|
Accounts payable |
8,253 |
|
Accrued liabilities |
14,298 |
|
Total Current Liabilities |
22,551 |
|
Long-term debt |
7,306 |
|
Shareholders' Equity |
|
|
Common stock |
6,698 |
|
Capital in excess of par |
50,820 |
|
Retained earnings |
72,327 |
|
Total Shareholders' Equity |
129,845 |
|
Total Liabilities & Equity |
159,702 |
53) Tootsie Roll Industries Inc.
Income Statement
As of December 31, Year 6 ($000s)
|
|
Year 6 |
|
Net sales |
194,299 |
|
COGS |
103,205 |
|
SG&A |
54,329 |
|
EBIT |
36,765 |
|
Interest expense |
612 |
|
Other income (expenses), net |
966 |
|
Income before income taxes |
37,119 |
|
Income taxes |
14,563 |
|
Net Income |
22,556 |
|
Total Cash dividends |
12,316 |
|
Shares Outstanding |
9,645 |
|
Average price per share (4th Q) |
$36.50 |
Selected Financial Ratios
|
|
Year 6 |
Industry Avg. |
|
Net Profit Margin |
|
8.2% |
|
Total Asset Turnover |
|
1.64 |
|
ROA |
|
13.4% |
|
Equity Multiplier |
|
1.42 |
|
ROE |
|
19% |
Referring to the financial statements for Tootsie Roll, what is the difference between the Industry and Tootsie for the net profit margin? (Tootsie - Industry)
A) 3.1%
B) 3.4%
C) 5.4%
D) 8.2%
E) 11.6%
54) Tootsie Roll Industries Inc.
Income Statement
As of December 31, Year 6 ($000s)
|
|
Year 6 |
|
Net sales |
194,299 |
|
COGS |
103,205 |
|
SG&A |
54,329 |
|
EBIT |
36,765 |
|
Interest expense |
612 |
|
Other income (expenses), net |
966 |
|
Income before income taxes |
37,119 |
|
Income taxes |
14,563 |
|
Net Income |
22,556 |
|
Total Cash dividends |
12,316 |
|
Shares Outstanding |
9,645 |
|
Average price per share (4th Q) |
$36.50 |
Selected Financial Ratios
|
|
Year 6 |
Industry Avg |
|
Net Profit Margin |
|
8.2% |
|
Total Asset Turnover |
|
1.64 |
|
ROA |
|
13.4% |
|
Equity Multiplier |
|
1.42 |
|
ROE |
|
19% |
Referring to the financial statements for Tootsie Roll, what is the difference between the Industry and Tootsie for total asset turnover? (Tootsie - Industry)
A) -0.20
B) -0.25
C) -0.34
D) -0.38
E) -0.42
55) Tootsie Roll Industries Inc.
Income Statement
As of December 31, Year 6 ($000s)
|
|
Year 6 |
|
Net sales |
194,299 |
|
COGS |
103,205 |
|
SG&A |
54,329 |
|
EBIT |
36,765 |
|
Interest expense |
612 |
|
Other income (expenses), net |
966 |
|
Income before income taxes |
37,119 |
|
Income taxes |
14,563 |
|
Net Income |
22,556 |
|
Total Cash dividends |
12,316 |
|
Shares Outstanding |
9,645 |
|
Average price per share (4th Q) |
$36.50 |
Selected Financial Ratios
|
|
Year 6 |
Industry Avg |
|
Net Profit Margin |
|
8.2% |
|
Total Asset Turnover |
|
1.64 |
|
ROA |
|
13.4% |
|
Equity Multiplier |
|
1.42 |
|
ROE |
|
19% |
Referring to the financial statements for Tootsie Roll, what is the difference between the Industry and Tootsie for return on assets (ROA)? (Tootsie - Industry)
A) -0.70%
B) 0.72%
C) 1.72%
D) 7.00%
E) 14.00%
56) Tootsie Roll Industries Inc.
Income Statement
As of December 31, Year 6 ($000s)
|
|
Year 6 |
|
Net sales |
194,299 |
|
COGS |
103,205 |
|
SG&A |
54,329 |
|
EBIT |
36,765 |
|
Interest expense |
612 |
|
Other income (expenses), net |
966 |
|
Income before income taxes |
37,119 |
|
Income taxes |
14,563 |
|
Net Income |
22,556 |
|
Total Cash dividends |
12,316 |
|
Shares Outstanding |
9,645 |
|
Average price per share (4th Q) |
$36.50 |
Selected Financial Ratios
|
|
Year 6 |
Industry Avg |
|
Net Profit Margin |
|
8.2% |
|
Total Asset Turnover |
|
1.64 |
|
ROA |
|
13.4% |
|
Equity Multiplier |
|
1.42 |
|
ROE |
|
19% |
Referring to the financial statements for Tootsie Roll, what is the difference between the Industry and Tootsie for the equity multiplier? (Tootsie - Industry)
A) -0.19
B) -0.17
C) -0.15
D) -0.13
E) -0.11
57) Tootsie Roll Industries Inc.
Income Statement
As of December 31, Year 6 ($000s)
|
|
Year 6 |
|
Net sales |
194,299 |
|
COGS |
103,205 |
|
SG&A |
54,329 |
|
EBIT |
36,765 |
|
Interest expense |
612 |
|
Other income (expenses), net |
966 |
|
Income before income taxes |
37,119 |
|
Income taxes |
14,563 |
|
Net Income |
22,556 |
|
Total Cash dividends |
12,316 |
|
Shares Outstanding |
9,645 |
|
Average price per share (4th Q) |
$36.50 |
Selected Financial Ratios
|
|
Year 6 |
Industry Avg |
|
Net Profit Margin |
|
8.2% |
|
Total Asset Turnover |
|
1.64 |
|
ROA |
|
13.4% |
|
Equity Multiplier |
|
1.42 |
|
ROE |
|
19% |
Referring to the financial statements for Tootsie Roll, what is the difference between the Industry and Tootsie for the return on equity? (Tootsie - Industry)
A) -2.14%
B) -2.02%
C) -1.81%
D) -1.63%
E) 2.14%
58) Tootsie Roll Industries Inc.
Income Statement
As of December 31, Year 6 ($000s)
|
|
Year 6 |
|
Net sales |
194,299 |
|
COGS |
103,205 |
|
SG&A |
54,329 |
|
EBIT |
36,765 |
|
Interest expense |
612 |
|
Other income (expenses), net |
966 |
|
Income before income taxes |
37,119 |
|
Income taxes |
14,563 |
|
Net Income |
22,556 |
|
Total Cash dividends |
12,316 |
|
Shares Outstanding |
9,645 |
|
Average price per share (4th Q) |
$36.50 |
Selected Financial Ratios
|
|
Year 6 |
Industry Avg |
|
Net Profit Margin |
|
8.2% |
|
Total Asset Turnover |
|
1.64 |
|
ROA |
|
13.4% |
|
Equity Multiplier |
|
1.42 |
|
ROE |
|
19% |
Referring to the financial statements for Tootsie Roll and based on the Du Pont analysis, what main reasons explain the difference(s) between Tootsie's ROE and the industry average ROE?
I.Tootsie does not have enough leverage.
II.Tootsie has more leverage than the industry.
III.Tootsie manages their assets poorly - low total asset turnover.
IV.Tootsie manages their assets poorly - high total asset turnover.
A) I
B) III
C) I and III
D) I or IV
E) II or III
59) Tootsie Roll Industries Inc.
Income Statement
As of December 31, Year 6 ($000s)
|
|
Year 6 |
|
Net sales |
194,299 |
|
COGS |
103,205 |
|
SG&A |
54,329 |
|
EBIT |
36,765 |
|
Interest expense |
612 |
|
Other income (expenses), net |
966 |
|
Income before income taxes |
37,119 |
|
Income taxes |
14,563 |
|
Net Income |
22,556 |
|
Total Cash dividends |
12,316 |
|
Shares Outstanding |
9,645 |
|
Average price per share (4th Q) |
$36.50 |
Selected Financial Ratios
|
|
Year 6 |
Industry Avg |
|
Net Profit Margin |
|
8.2% |
|
Total Asset Turnover |
|
1.64 |
|
ROA |
|
13.4% |
|
Equity Multiplier |
|
1.42 |
|
ROE |
|
19% |
Referring to the financial statements for Tootsie Roll, what amount of leverage (i.e. debt-to-equity) would Tootsie need to make its Year 6 return on equity equal (ROE) to the industry average ROE? (Round to initial ratios to nearest percentage.)
A) 0.3456
B) 0.9200
C) 1.1333
D) 1.4200
E) 1.7632
60) All else held constant, an increase in leverage should increase the ROE.
