Brazil

UNIVERSIDAD AUTÓNOMA DE NUEVO LEÓN

FACULTAD DE CONTADURÍA PÚBLICA Y ADMINISTRACIÓN

LIC. EN NEGOCIOS INTERNACIONALES

Finance

Homework III

Financial Analysis

Ing. Alberto Nava Villarreal

Alcocer Salas Tania Cecilia
Herrera González Blanca Lidia
Macías Silva Yolanda Yazmín
Quintero Alfeirán Carlos Damián
Sandoval González Laura Pamela

Team 5

CD. UNIVERSITARIA DENUEVO LEÓN, A 22 DE FEBRERO DEL 2011

1. Dental Delights has two divisions. Division A has a profit of $200,000 on sales of $4,000,000. Division B is only able to make $30,000 on sales of $480,000. Based on the profit margins (returns on sales), which division is superior?

Division A
Profit Margin
|Income |= |$200,000 |= 5% ||Sales |  |$4,000,000 |  |

Division B
Profit Margin
|Income |= |$30,000 |=6.25% |
|Sales |  |$480,000 |  |

Division B is superior

10. Global Healthcare Products has the following ratios comparedto its industry for 2008.

|  |  |  |  |
| | |Global Health Care |Industry |
|Return on Sales……….. |  |2% |10% |
|Return on assets……… | |18% |12% |

Explain why the return-on-assets ratio is so much more favorable than the return-on-sales ratio compared to the industry. No numbers are necessary; a one-sentence answer is all that is required.

All is related with the quantity of assets the company belongs. Even they got a low rate on sales they have less assets that permitthe turnover of 18%.This is verified in Du Pont system of analysis, in which sales to total assets is 9 for the Global Health Care Company and only 1.2 for the Industry. Thus Global Health Care Company earns less on each sales dollar, but it compensates by turning over its assets more rapidly (generating more sales per dollar assets). Return on total assets is part of the Du Pont system ofanalysis [Return on assets (investment) = Profit margin [pic] Asset turnover].

13. Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation.

a) Butters Corporation has a profit margin of 7 percent and its return on assets (investments) is 25.2%. What is the assets turnover?

|Return on Investments || |0.252 | |
| |= Assets Turnover | | |= 3.6 |
|Profit Margin | | |0.07 | |
|1 - Debt/Assets || |1 - .5 | |
|1 - Debt/Assets | | |1 - .35 | |
|Average Daily Credit Sales | | |$7,500 | |
| || |$2,700,000 |= $7,500 |
| | | | | |

The average collection period is 38 days

19. The Speed-O Company makes scooters for kids. Sales in 2008 were $8,000,000. Assets were as follows:

|Cash...